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How to find the best tracker unit trusts to invest in

by , 24 November 2015

Whilst you may opt to invest in one or two actively managed unit trusts where the fund manager tries to outperform the market, there is a place for passively managed unit trusts in your portfolio.

Passively managed funds aim to track the performance of the market.

So how should you go about choosing tracker unit trusts?

Read on to find out…


The ins and outs of tracker unit trusts

 
Tracker unit trusts give you the benefit of replicating the performance of the index the fund tracks. You’ll find different unit trusts tracking different indices.
 
There is one main index on the Johannesburg Stock Exchange worth tracking in your portfolio…
 
The JSE All Share Index
This is the first index to look for exposure to. This index captures the moves of the overall market. There are times when smaller companies perform better than larger companies, so by tracking the All Share Index you can benefit from this.
 
You can of course invest in other unit trusts which track other indexes, like the JSE Top 40 Index or specific sectors, such as financials, property and mining.
 

How to pick tracker unit trusts

 
The performance of a tracker unit trust should pretty much mirror the performance of its benchmark index. The main thing you need to focus on is fees.
 
You want to find the best tracking unit trust with the lowest costs. When you’re looking for tracker unit trusts to invest in, you need to compare the upfront fees and the annual management fees.
 
As long as performance is on par, you should invest in the fund with the lowest costs.
 
So there you have it. How to find the best tracker unit trusts to invest in.
 
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