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Understanding Unit Trusts: A guide to diversified investing
A unit trust, or mutual fund, is a professionally managed form of collective investment that pools money from many investors and invests in stocks, bonds or other securities.
Amy is a 30-something teacher with a steady income. The topic of investing for her future often comes up in conversations among her peers. They’re worried about what tomorrow might bring, but they’re finding it tough to navigate the complex financial landscape and financially prepare themselves for different life stages.

With limited time and knowledge about financial markets, Amy is overwhelmed at the prospect of managing her investments. The flood of content on TikTok and other social media about investing has also made it more confusing.

One day, a friend recommended she consider investing in unit trusts with Baiduri Capital and after talking to a licensed investment consultant, she took the first step towards investing in a unit trust.

Amy contributed a small portion of her salary to the unit trust regularly. She found it less stressful as her monthly investments were automated and left to an experienced fund manager to manage.

Unit trusts explained
Like Amy, investing might appear daunting, so here are the key things you need to know about unit trusts.

A unit trust, or mutual fund, is a professionally managed form of collective investment that pools money from many investors and invests in stocks, bonds or other securities. This allows you to invest in a range of assets and earn potential returns through capital gains or payouts.

Such funds are managed by a Fund Manager or Portfolio Manager, who trades the fund’s securities and passes on proceeds to the individual investors. This allows you to access their expertise and experience – opportunities that are not always available to individual investors like Amy. In return for managing the investments, the Fund Manager is paid a certain amount directly from the pool of money called management fees.

Investors like Amy purchase “units” or shares of ownership of the unit trust. The value of a share of the unit trust is known as the net asset value (NAV) per share, and this is calculated daily based on the total value of the fund divided by the number of shares issued.

The benefits
There are several benefits to investing in unit trusts. Firstly, diversification. By investing in a variety of assets, unit trusts spread risk compared to investing in single assets. The poor performance of one asset doesn’t impact the entire portfolio.

Secondly, experienced fund managers who have access to a variety of tools and resources make the investment decisions, conduct market research, and handle the buying and selling of assets. This makes it more accessible for individual investors to jump in, without having the means or expertise to create a diversified portfolio on their own.

Finally, Baiduri Capital offers a Regular Savings Plan (RSP) where you can set a fixed amount to your unit trust monthly, from as low as $100 in any of its respective currency – this is known as Dollar-Cost Averaging. When you invest monthly, you minimise the impact of short-term market volatility and diversify the timing of your investments.

The considerations
Like all investments, there are some risks and considerations to understand before you dive in. 

Firstly, market risk. The value of the units can go up or down depending on the performance of the underlying assets.

Secondly, liquidity or how quickly you can convert an asset to cash. While it is generally easier and quicker to get cash from unit trusts, there may be times when it can be harder to sell units.

Finally, performance. Past performance is not a reliable indicator of future results, and there’s no guarantee of returns.

Amy is slowly realising her financial goals through investing in Unit Trusts. Her advice to investors is this: “Start early, maintain consistency, and stay informed about your investments to make confident decisions.”

If you’re interested in learning about investing in unit trusts, reach out to us. Call us at +673 226 8588 during business hours, email us at [email protected] or visit us at any of our branches.
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19 September 2023

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