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How to pick the best unit trusts for you

by , 05 November 2015

If you're looking for a way to gain exposure to the stock market without having to pick individual shares, unit trusts could be the ideal instrument for you.

Unit trusts are extremely popular in South Africa and due to this there are hundreds from you to choose from.

So how can you pick the best unit trust for you?

Read on to find out…


The different types of unit trusts

 
Different unit trusts have different mandates. You can invest in unit trusts that focus on money market accounts and bonds to ones that focus on gold miners and property companies.
 
To help you pick the unit trusts best suited to you, you need to consider your attitude to risk. If you’re very conservative, investing in a higher risk fund like one focusing on gold producers, perhaps isn’t the best option.
 
You also need to know how long you want to invest in unit trusts for. You are best holding some unit trusts for the short-term, whereas other unit trusts are for the long-term.
 
Once you know your risk profile and investment time horizon, you can start looking for unit trusts that suit you best.
 
You also need to consider the diversification of the unit trusts you hold. If you want to benefit from the performance of the stock market as a whole, you can invest in funds that hold the largest stocks in South Africa. Or you may want to hold a variety of different unit trusts in different sectors.
 

Finding out more about unit trusts

 
All unit trusts have a fact sheet. A fact sheet details a number of things like performance and fees, but it also tells you the risk profile of a unit trust and how long you should consider investing in it.
 
You’ll find that many fund managers have search tools to help you find the unit trusts that suit your profile.
 
Using these you can make a short list of potential unit trusts.
 
Before investing in unit trusts, check out the fees. The cheaper the fees, the better it is for you, as long as the unit trust performs consistently and is at least on par with its benchmark.
 
If you need help picking a unit trust, you can speak to a financial adviser who can help guide you towards ones best suited to you.
 
So there you have it. How to pick the best unit trusts for you.
 
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How to pick the best unit trusts for you
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