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There are many options available to meet the needs of investing for retirement, saving for a new home or for your children’s future. Increasingly investors have turned to unit trusts (also known as mutual funds), but what is a unit trust and how can investing in them help to meet your financial goals?

The Difference Between Saving and Investing

Four Advantages of Investing in Unit Trusts

Investors turn to unit trust because of four distinct advantages they may offer over investing in individual securities.

1. Professional Management — Unit trust offers investors access to full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments.

2. Diversification — Buying shares in a unit trust is an easy way to diversify your investments across many securities, which is just another way of saying that you won't have all your eggs in one basket. If one investment decreases in value, another investment in the portfolio may increase.

3. Affordability — For many people, it would be more costly to purchase directly all of the individual securities held by a single unit trust. By contrast, the minimum initial investments for most unit trusts are more affordable.

4. Liquidity — Most unit trusts allow you to sell your fund shares on any day the stock markets are open, so you have easy access to your money. Of course the value of your shares, when redeemed, may be worth more or less than their original cost.

Types of Unit Trusts

Unit trust funds come in many varieties, designed to meet different investor goals. Most of Franklin Templeton’s unit trusts fall into one of three main asset classes:

Equity Funds

An equity fund is a fund that invests primarily in stocks. The objective of an equity fund is generally to seek long-term capital appreciation. These type of funds may focus on certain sectors of the market or may have a specific investment style, such as investing in value or growth stocks.

Fixed Income Funds

A fixed income fund is a fund that invests primarily in bonds or other debt securities. Fixed income funds generally pay a return on a fixed schedule, though the amount of the payments can vary. Investors may consider this type of fund for their potential for income generation and capital preservation.

Multi-Asset Funds

There’s more to diversification than just combining bonds and stocks. A multi-asset fund offers exposure to a broad number of asset classes, often offering a level of diversification typically associated with institutional investing. Multi-asset funds may invest in a number of traditional equity and fixed income strategies, index-tracking funds, financial derivatives as well as alternative investments. This diversity allows portfolio managers to potentially balance risk with reward and deliver steady, long-term returns for investors, particularly in volatile markets.

How to Invest in Unit Trusts

Speak to a financial adviser. A financial adviser (who can be a representative from a financial advisory firm, a bank or an insurance company) is a good person to speak to regarding your investment plans.

A financial adviser can help:

  • establish your financial profile
  • assess your current financial situation
  • set personalised and realistic investment goals
  • define the best way to reach your objectives

He/She will also be able to monitor the performance of your portfolio and propose adjustments when and if needed. 

Alternatively if you currently do not have a financial advisor, you can approach any of our authorized distributors who do provide financial planning services.