What is a unit trust?
Your money will be pooled with that of other investors and invested in a portfolio of assets to achieve the investment objective of the unit trust.
Unit trusts are managed by professional fund managers with expertise and experience in investments. They will monitor your investments on a day-to-day basis, and make decisions based on research and analytical tools that you may not have access to.
By investing in a unit trust, you are pooling your money with that of other investors. As such, the fund manager is able to invest in a wider range of assets. Some assets such as bonds require a minimum investment of around $100,000, which may be difficult for individuals to access directly.
You will also be able to tap overseas markets with less hassle, and as the size of the assets under management is large, you will benefit from lower transaction costs.
As a unit trust invests in a wider range of assets, you can better spread your risks. This means that poor performance of any one asset in the unit trust is not likely to have a major adverse impact on your investment as a whole.
MoneySENSE has produced a guide to help you understand what unit trusts are, and what you should consider before investing in them.
See the guide here.