Unit Trusts: Why investing in SA is a GREAT move
In the current economy, investing in unit trusts in SA is a good option if you don’t have a lot of money to spare. Here’s why …
When it comes to investing in unit trusts in SA, I’m reminded of a quote that’s as inspiring as it is unlikely. The quote is attributed to the great showman, PT Barnum. He said, “Money is a terrible master but an excellent servant.”
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How great is that for a quote to make us shift our thinking about money and the decisions we make with it. Unit trusts are one such option if you want to invest but don’t have a lot of money to spare, say the experts from SpiritInvest.com.
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INVESTING IN UNIT TRUSTS IN SA
Units trust are probably the simplest and most effective way of investing with not a lot of money. There are roughly 1700 different unit trusts (otherwise known as mutual funds) available in South Africa.
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A unit trust, unlike a share portfolio, is a collective investment scheme held under the structure of a legal trust. The benefit of this is it gives the investor a degree of security. The risk of investing is shared across all the trust’s financial instruments. And if something goes wrong the company that runs the unit trust will take immediate action to keep it safe.
INVESTMENTS ARE POOLED
Even though there are many options when investing in unit trusts in SA, the foundations are simple and easy to understand. Investor money is pooled and an asset manager purchases various shares, bonds and securities. This collective is then divided up into units and given an equal share of the underlying assets.
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There are many legislative and regulatory requirements which protect investing in unit trust in SA, too. Best of all, for those who don’t have a lot of money to spend, minimum contributions can be as low as R200 – R500 per month, or a lump sum investment of R5 000.
THINGS ALWAYS EVEN OUT
Experts say a huge benefit of investing in unit trust in SA is Rand-cost averaging. Instead of worrying about buying low and selling high like a share portfolio, your unit trusts’ performance tends to average out each month.
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Every unit trust is published with details on what it is benchmarked to achieve. Fund units are priced on a daily basis by the companies administering them. They are also liquid and can be bought and sold in real time with funds reflecting in as little as 48 hours.
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We’ll put together a follow up story on investing in unit trusts in SA. Which are the best performing and cheapest trusts and how you can invest in them. So, stay tuned for that …
This article is for informational purposes only and should not be construed as financial advice. For more info on investing go to SpiritInvest.com. And don’t forget to follow us @TheSANews on Twitter and The South African on Facebook for the latest updates.