If you are interested in investments there are a lot of different choices on offer. Unit trusts are a tried and tested investment that has proven worth the risk for numerous investors. The following information is a guide to unit trusts to help you determine if they are right for you.How Unit Trusts Work
Unit trusts are designed so that private investors can enter the stock market with the guidance of a professional fund manager. Unit trusts are a manageable investment that is relatively simple to maintain with good options for accumulation.
Unit trusts work as a collective investment which means that a fund is amassed by a group of investors. Investors provide the capital which is pooled into a single fund and used to invest in a portfolio of holdings.
Unit trusts invest in a variety of holdings. These may include equities, gilt edged securities and properties. The UK maintains over fifteen hundred unit trusts all investing in different quantities of various investments. As no two unit trusts are identical the investor is presented with a great range of choice.Acquiring Unit Trusts
Unit trusts can be acquired from a number of groups within the financial sector. These include stock brokers, investment groups and independent financial advisers who can also provide additional advisory services when considering a choice to purchase.
Depending on who you invest with there are different options for purchasing unit trusts. Unit trusts can be purchased as a one off purchase with a minimum investment of around £500. Alternatively you can pay a monthly fee which is usually around £30. To encourage new investors some investment groups won’t charge an initial fee but will increase the annual fee on a sliding scale.
Once you have invested in a unit trust control is handed over to the fund manager. The fund manager uses their knowledge of the stock market to make investments in a range of holdings. The capital is spent on a range of investments to ensure some stability.Risks
As with all financial investments a degree of risk is involved. These risks will vary depending on the particular investments of the unit trust you choose. It is worthwhile conducting some research before investing to see what the market has to offer in terms of unit trusts and to see which investments are performing well at the time.
If you find a unit trust that appeals to you it is recommended that you review its previous track record before investing. This should give you a rough idea of its future performance and potential. If you find a unit trust which has performed consistently well look into the viability of its holdings to determine if it is going to achieve a repeat performance.
If you are willing to accept the risks there is a good chance you will receive a better return on your capital than with a savings account. It is also worth bearing in mind that you will need to pay charges on your unit trusts and also annual management fees.