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Before you invest in another unit trust, consider these four factors!

by , 06 March 2014

If you have a portfolio packed with unit trust, you probably think you know exactly how to pick the best unit trust to invest in. And maybe you do. But research shows most unit trust investors forget to review at least one of these four crucial unit trust investing facts. And it's putting their returns at risk…
Check these four crucial factors before investing in unit trust
Here are the things RollingAlpha.com says you should consider before investing in a unit trust:
  1. The size of the investing house (and the unit trust in question);
  2. The investing style of the fund;
  3. The fees
  4. Past performance
And here’s why…
#1: Size matters when it comes to investing in unit trusts…
“This is something that is far more important than people give it credit for. You see – there is a trade-off between size and fees,” explains the site.
In most cases, large funds are good for the following reasons:
  • They trade in larger amounts so they get better discounts;
  • They cost less to manage because more people carry the cost;
  • They tend to be more conservative with a longer-term outlook than smaller funds.
But that doesn’t mean you should discount smaller funds. Large funds often find it hard to beat the market. See where the trade-off comes in?
#2: Pick a unit trust style that suits your risk appetite
Unit trusts are broken into two main categories: Conventional and contrarian.
If you’re more risk-adverse, conventional funds will suit your risk appetite better.
#3: What are the costs?
As discussed here, when it comes to unit trust investing, fees and charges are taken out of your investment before your money starts working for you. And they tend to be hidden away and brushed aside by those eager-beaver sales people. But that doesn't mean they don't matter. In fact, they can make or break your portfolio. So check exactly what you’re paying to determine whether it’s the best unit trust for you to invest in.
#4: Consistency of unit trust returns
And lastly, don’t ignore past performance! Consistency over one, three and even five years can help you separate the best unit trust to invest in from the worst.
By knowing the facts behind each of these factors, you’ll be able to pick the right unit trust to invest in.

Before you invest in another unit trust, consider these four factors!
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