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General Information
Unit trusts provide a simple way to invest into the sharemarket especially overseas sharemarkets.
They are a simple investment concept where investors pool their money together in a fund which is run by professional managers who invest in a range of assets as specified by the provisions under a Trust Deed.
Investors' contributions to the pool are divided into units and their value fluctuates in line with the actual values of the underlying investments in the unit trust.
The major advantages of unit trusts are:
Spread of Risk:
Unit trust investors are able to obtain a much wider spread of risk than most could achieve from their own resources. Buying into a unit trust gives immediate access to a diversified portfolio. This spreading of investment reduces volatility and thus risk.
Professional Investment Management:
Through a unit trust, investors can buy professional investment management at a reasonable cost. The manager then makes the decision about which company or industry to invest in.
The manager undertakes research and maintains contacts that the individual investor is simply unable to do.
Simple Administration:
Administration of ones own portfolio of individual investments can be timely and expensive. Both are reduced when investing via unit trusts.
Redemption at any time:
Subject to any restrictions in the trust deed for unusual circumstances, funds are generally available for withdrawal simply by writing. They are not suited for short term investing, however, and generally require a minimum time frame of 3 - 5 years.
Taxation disadvantage of Unit Trusts:
Unit trusts are currently taxed at 33%. In comparison, if you own individual shares, there is no tax payable on capital gains.
Fee structure:
There are fees associated with investing in unit trusts. The first is the entry fee which is typically between 5 - 6% (Note EQUITY reduces the entry fee to 2.5%).
The other fees are Management fees which cover the administration expenses in running a unit trust such as marketing, salaries etc. Fees for these services typically vary between 1.5 - 2%.
The company does not formally manage portfolios, and therefore no annual fee or other charge is taken out of the portfolio. We do, however, offer a custodial and portfolio management service if required, especially by older or offshore clients.
EQUITY is constantly updating and reviewing clients' portfolios, while
providing ongoing advice when required.
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