INVESTING IN UNIT TRUST FUNDS

By: John Muchiri

A unit trust fund is a collective investment scheme in which investors contributions are pooled together to purchase a portfilio of financial securities such as shares, bonds, and other money market instruments.
In  unit trust fund you have the option of investing in a money market fund or an equity fund.
Money market fund invests interest bearing assets such as treasury bills and bonds, corporate bonds, commercial paper e.t.c
Equity funds invest principally in shares but may also invest in interest bearing instruments. Equity funds are considered high risk venture and therefore are long term with higher returns.
Unit trust are professionally managed, thus giving an investor peace of mind especially when the investor is constrainted in term of time.

Benefits of investing in unit trust funds.
#1. Risk diversification
This refers to spreading of risks over a wide variety of securities in different sectors. Unit trust facilitate this by pooling funds from small investors and investing the funds in portfolio of assets. Through diversification investors' exposures to risk are minimised.

2#. Liquidity.
An investor can sell all or part of his investment at any time.

3#. No tax charges.
A unit trust fund does not pay tax on its income, either from dividends or interest.

4#. Portfolio portability.
Investors can easily switch from one portfolio to another when their needs or risk profile changes.

5#. Professionally managed.
Unlike other investments, unit trust funds are managed by professionals who understand investing in unit funds.