Just what is a unit trust?

A company known as M and G way back in 1931 launched the very first unit trust. Since then, the unit trust industry has grown and grown, to the extent that it is now responsible for managing over three trillion pounds worth of investment capital worldwide.

A unit trust operates much like an investment club. Basically, you pool your money with a lot of other investors, and a fund manager invests the whole lot in the stock market. The value of the individual investments in the fund, known as units, goes up and down in accordance with the overall value of the fund.

When you buy into a unit trust, you purchase units, which are shares in the fund. The fund can issue more units as and when more investors come in. The market value of the units rises and falls in accordance with the performance of the shares invested in by the fund.

Unit trusts are a popular investment vehicle for private individuals, as they allow you to gain access to a much wider range of shares than would be available to you if you were trading on your own. Also, the potential for loss making is far less than with individual shares, as the risk is spread across a whole portfolio of shares.

Unit trust types now come in many forms, with trusts specialising in various kinds of investment. Those with the largest profit potential are also the unit trusts with the higher risk factor. These types of unit trust often invest in emerging markets.

Investing in a unit trust will cost you a little more than just your investment. You have to pay a fee, which is most often 5 per cent of the total investment, along with an annual management fee to pay for the running of the fund.

Low risk unit trusts, like the index tracker funds, will tend to have lower annual management charges, while higher risk unit trusts will have higher maintenance costs and management charges will tend to be higher - at around 2 per cent.

Units in unit trusts can be purchased from a fund management house via brokers like Legal and General, online fund supermarkets, or via an Independent Financial Adviser. Purchasing your units through a middle man rather than directly from a fund manager will usually result in a better deal.

Article Source: http://www.casinoarticlessite.com

Otha Isiminger wrote this article about unit trust accounts because he has opened one with Legal

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