If you think all unit trusts are safe and boring... think again

Julie Brownlee, Fsp Invest, 21 Feb. 2014

Tags: unit trusts, unit trust funds, funds, riskier unit trust, smaller company funds, mining funds, resources funds, investing in unit trusts, small-caps, mining and resources funds,

Unit trust funds aren’t just investment vehicles to use to invest money into for your retirement. They also cater for those seeking a bit more risk and the possibility of higher returns. If you want to invest in small-caps or mining companies, but aren’t sure which ones to go for, you could invest in a fund that will do this for you. Read on to uncover more about these riskier unit trusts…

Some investors may view unit trusts as a safer alternative to investing on the stock market, the team of experts at The South African Investor explain…

But there are unit trust funds that cater to those investors with a higher appetite for risk. Obviously, these types of funds aren’t the ideal vehicle to put your retirement nest egg in. But with the higher risk you take on, there’s the potential for higher reward.

Let’s take a look at a couple of categories of unit trusts that fall into the higher risk category…

Funds in smaller companies

These type of funds invest in established smaller companies and emerging companies that are the initial phase of their life.

These types of funds invest in small-cap and mid-cap shares. A minimum of 75% of the fund must be invested in these shares at a given time.

Because the focus of this type of fund is smaller companies, they may be more volatile. And they’re more risky as a result. A fund more diversified across the stock market would be less risky and less volatile.

Mining and resources funds

These funds invest in companies that invest in exploration, mining and processing of resources. The primary focus of the funds is to focus on the resource and mining sectors.

Due to the nature of these funds, you can also expect them to be more volatile. And they will be more risky as a result.

So there you have it, an insight into some riskier unit trusts.

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