Unit trust funds or shares: Which investment is better for first time investors?

Fsp Invest, 12 Dec. 2013

Tags: unit trust fund, unit trusts, the benefits of unit trust, investing, funds, first time investor, unit trust or shares, how unit trusts work, how to invest in unit trusts

When you’re trying to get started out on the right foot as an investor, where should you start: Unit trust funds or shares? The key is – as with most investments – you’ve got to spread the risk. Fortunately, if you have only a small starting pot, you can spread your risk by buying a unit trust fund, which reduces your risk. Read on to find out more…

Unit trusts are the best place to start for first time investors with a small starting pot, Dr Steve Sjuggerud in Investment U explains...

You’ll get all the benefits of being a big investor, without giving up much at all just because you’re starting small.

With a small investment (say R5,000 or less) in a unit trust fund, you actually end up owning a number of shares, which spreads the risk. You can also opt to invest on a monthly basis too, allowing you to slowly build up your holding.

A professional fund manager manages this portfolio of shares, so you don’t have to be the stock-picking expert. Fees per year can come in at about 1%.

How unit trusts funds work

But what exactly is it you’re buying? When you buy a unit trust fund, you’re actually buying shares of the fund. The fund takes your money and combines it with money from other investors like you.

So a unit trust fund is a big professionally managed pool of money. That’s why expenses can stay low.

There are all kinds of different shares and unit trust funds out there today.

Here’s how to get started with unit trust funds

To invest you just have to contact the fund manager. Or you might be able to do it through your bank. Just check with them.

You can also read up on the different fund manager’s websites on the performance of the different funds they provide, along with the fees charged.

You also view the different unit trusts and their performance available in SA here.

So there you have it, a unit trust fund can make more sense as a first investment.

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