A Unit Trust is a vehicle which allows us to invest in a mix of the major asset classes such as equity, property, bonds, cash to create a very diverse investment strategy. Unit Trusts offer you the ability to invest in a mix of the major asset classes – equities (shares), bonds and short term money market instruments.
When you invest in a unit trust you are effectively lumping in your money with other investors and paying a fund manager to invest it wisely according to a specific mandate. Investors can invest much smaller sums of money in a unit trust and achieve a greater level of diversification which is very practical rather than buying shares through a stock broker.
Unit Trusts should generally be viewed as medium-to-long term investments.
What are asset classes?
Asset classes are the areas where your money gets invested. Unit Trust companies invest mainly in 4 types of asset classes. Each asset offers a different amount of risk therefore it potentially offers different returns.