Unit trusts can be an excellent medium to long-term investment, providing access to a wide variety of assets without the need to spend the time managing them yourself.
Your money (a regular amount or one-off investment) is pooled with that of other investors into a large shared fund which is professionally managed.
It is `open ended' as the number of units in the fund depends on supply and demand (this is the difference between a unit trust and an investment trust which has a fixed number of shares). Units are created or cancelled as investors join or leave the fund. The value of the underlying assets in the fund determines the price of the units which changes on a day-to-day basis.
Charges for this type of investment can be very variable but are usually one or more of these:
· Initial charges when units are bought
· Annual management fees
· Exit charges when you cash in your investment
· Bid/offer spread
As with many investments, the value of your investment can go down as well as up, but as the funds are pooled and spread, the risk is less than if the money was all invested in one place. Many providers now offer these products and they will give full details of how the funds are invested and a risk profile.
See also
Open Ended Investment Companies and
Investment Trusts.
