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How to get the best returns when investing in unit trusts

By unknown | Feb 23, 2010 | COMMENTS [ 0 ]

THERE are many local and international unit trusts available.

THERE are many local and international unit trusts available.

Included on the menu of unit trusts are SATRIX funds. Investors regularly ask how they should go about choosing the right fund.

In order to choose the "right" fund, ask yourself:

lWhat is the purpose of my investment?

lWhat do I want from it?

lWhat will be the "term" of my investment?

lAm I a conservative, balanced or aggressive type of investor?

lDo I have a preference for any particular sector of the economy - property, resources, financial, industrial or IT?

lDo I need income from the investment?

You can invest a lump sum or, alternatively, a regular amount on a monthly basis, starting from R200 a month. In the case of SATRIX R300 a month.

By investing monthly, you enjoy the benefit of "rand cost averaging" - as the price of your unit trust shares rise or fall, you will buy less or more units for the same monthly investment amount. Over a longer period, your shares should average out at a lower cost than the amount you paid for them.

All unit trust companies have numerous and different types of funds, each with their own investment specialists and specific objectives, covering a specialised or general range of selected shares.

This means that your money is managed on an ongoing basis and is part of the large "pool" of funds under that specific management team.

Having made your selection you need to understand the costs. These involve initial fees and ongoing fees. You need to know how these charges compare with similar funds.

The price at which you buy your shares is described as "net asset value", which is not affected by supply or demand, as is the case with ordinary shares.

As the total market value of the assets rise or fall, so will the net asset value be similarly affected.

The major advantage of holding unit trust shares is that there is always a guaranteed buyer for your shares - the management company has an obligation to buy them back from you.

Unit trusts represent the ideal savings vehicle for serious long-term investors.

Here are some guidelines to follow when purchasing units trusts:

lThe investment must be viewed in the long term seven to 10 years, or longer.

lThis is a wonderful savings vehicle for children's education

lPrices will fluctuate dependant upon whether markets are going up or down. The best time to buy is when markets are down.

lDon't panic and cease contributing when markets fall. Remember this will be a good time to double up.

lYou can buy a range of unit trusts by using an investment house LISP and can select the funds and then have the flexibility to switch between one fund and another incurring a nominal cost or no cost at all.

lYou can also buy unit trusts where you permit the investment house to make changes on your behalf.

For investors who have little or no knowledge of equities, this is a great way to buy a growth investment involving little corporate risk, but always understanding that there is market risk. Markets, over an extended period of time, go up, but also come down and this is the reason equities need to be viewed over the long term.

lThe writer is a director of Bryan Hirsch Colley.


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