How Does a Unit Trust Work in South Africa?
What exactly is a unit trust?
A Unit Trust is a sort of mutual fund in which money is managed by a fund manager on behalf of several investors known as “unit holders” in order to attain a certain return.
How does a Unit Trust work in South Africa?
A Unit Trust collects money from its unit holders and invests it in a diversified portfolio of assets such as stocks, bonds, money market instruments, and other investments. When the Unit Trust earns a profit, the proceeds are divided among the unit holders in proportion to their investment.
Are Unit Trust a good investment in South Africa?
Unit trusts are wonderful investment vehicles that make it simple to invest your after-tax savings.
How do I invest in Unit Trust in South Africa?
You can invest in a Unit Trust fund through a financial services provider such as a broker, an Investment Management Company, or, in some occasions, your bank. See List of the Best Investment Companies in South Africa.
How do you profit from a Unit Trust?
When the price of the units you purchased in the fund rises above the price you paid for the fund, you profit (capital gain). Some funds distribute dividends and interest revenue to unit holders.
What are the advantage of investing in a Unit Trust?
1. You can usually sell your shares at any time (High Liquidity).
2. Diversification of portfolio to hedge against market volatility.
3. Low initial investment amount.
4. Access to professional fund management team.
What are the advantage of investing in a Unit Trust?
1. No changes in holdings
2. High fees required for running the trust
What is the main risks associated with investing in a Unit Trust?
The main risk associated with unit trusts is that your investment could lose value if share prices decline because unit trusts invest in publicly traded companies.
