Unit trusts, like OEICs, are a type of collective investment that allows you to invest your money along with many other investors. Collective investments can be good investments, as everyone’s money is pooled together which spreads the risk involved.
In a unit trust, you can buy or sell ‘units’ of a fund that’s run by a fund manager. The fund manager will invest in a number of different companies and assets (such as gilts or property) and will try to forecast which are likely to go up in value over time. The fund can either be active or passive: active funds are actively managed by a fund manager who decides the best investment for the fund – typically a high-risk investment while passive funds follow the market more closely and are regarded as a lower risk investment.
As a unit trust invests in a range of different assets, the risk to your money is spread. It is important to know that the value of your units can go down as well as up, depending on the value of the assets. Any growth you do achieve on your investment will be converted into additional units although you can arrange to take this growth as income if you wish.
An independent financial adviser (IFA) can help to choose a unit trust that has the right investment strategy for you, as well as explaining any potential benefits and risks involved. Find an IFA here.
Questions you might like to ask a financial adviser…
- Should I invest in an active or passive Unit trust?
- Will I get any interest or dividends on my money?
- What are the charges involved, and what are they for?
- How does this Unit Trust differ from an OEIC?
- How long should I keep my money in a Unit Trust?