How to get the balance right between equity unit trusts and bond unit trusts

by , 20 November 2015

For some investors, the idea of putting a large proportion of their investment money in equity unit trusts doesn't appeal. This is usually due to the higher risks associated with investing in shares.

As well as using unit trusts to invest in shares, you can also invest in unit trusts focusing on bonds.

So how should you go about deciding how to split your unit trusts between shares and bonds?

Read on to find out…


The ins and outs of bond unit trusts

 
Many investors like the benefits that bonds give over shares. Bonds give you a more regular income and there’s less chance of losing money. In this case bond unit trusts may appeal.
 
Equity unit trusts, compared to bond unit trusts, may pay out less income over time and will be more volatile, but over the long-term, you should see higher returns.
 
All asset classes play a role in diversification. Sometimes bonds and equities move in different directions, which is good for your portfolio.
 

How much to invest in bond unit trusts

 
By ignoring equities entirely, you remove the chance of making good returns over the long-term. To deal with the higher risk factors involved in shares, you could think about altering your exposure over time.
 
A good rule of thumb is to base your equity and bond exposure to your age. As you age, you decrease your percentage of money in equity unit trusts and increase your percentage of money in bond unit trusts.
 
For instance:
 
  • At 25 years old, you hold 25% in bond unit trusts and 75% in equity unit trusts.
  • At 50 years old, you hold 50% in bond unit trusts and 50% in equity unit trusts.
  • And at 75 years old, you hold 75% in bond unit trusts and 25% in equity unit trusts.
 
You can add diversification to your bond unit trust holdings by investing in different bond funds.
 
So there you have it. How to get the balance right between equity unit trusts and bond unit trusts.
 
*********** Hot off the press ************
 
Invest in this 'ETF Killer' today!
Starting from just R500
 
It's easy to understand why ETFs are a hot investment - And it's no secret that I'm a huge fan of them. 
 
They have minimal fees, require small contributions and on top of all that they give you a fairly diversified investment.
 
But here's the thing...
 
I've found a new investment that's even better than ETF's - An investment that I call the 'ETF Killer'. Not only does this 'ETF Killer' offer even lower fees than Unit Trusts, it gives you even more diversification and potentially higher returns all in one neat bundle!
 
 
*************************************

 

Vote article

How to get the balance right between equity unit trusts and bond unit trusts
Rating:
Note: 5 of 1 vote

Related articles



Related articles


Watch And Learn




Trending Topics