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Looking for the best asset allocation mix? Then prudential funds are the best unit trusts to invest in

by , 20 March 2014

The first rule of investing is never put all your eggs in one basket. That's what we mean when we talk about asset allocation. And here's the good news for investors who don't want to do this themselves. There's a type of unit trust that'll do it for you: Prudential fund unit trusts.

What is a prudential fund unit trust?

Prudential funds (also known as balanced funds) are among the oldest of all unit trust types.

They come in three forms – high equity, medium equity and low equity – and their goal, as equinox.co.za explains is to “invest in a wide spread of investments in the equity, bond, money market and property markets to maximise total returns (comprising capital and income growth) over the long term.”

Here’s why they’re the best type of unit trust to invest in if you’re looking to spread your risk around.

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Three benefits of investing in a prudential fund unit trusts

Here's what The South African Investor’s Leon Kok likes about this type of unit trust:

1. Long-term capital appreciation: Prudential funds are ideal for investors seeking long-term capital appreciation. Because of this, they’re particularly suited to provident and pension fund needs.

2. Winning strategy: They’re based on the principle that share prices and bond prices go in opposite directions. In a booming economy, for instance, shares rise because of improving corporate profitability. Then in a recession the opposite happens. Shares fall and bonds rise. When investing in a prudential fund unit trust, you’ll still achieve good gains in either scenario.

Of course, there are also times when shares and bonds go up together, or fall simultaneously, but that’s generally the exception.

3. Relatively low risk: Creating a superior portfolio that achieves superior returns at lower than market risk involves identifying securities with an undervalued stream of sustainable cash flows. Several prudential funds have proved that they can do that. These funds are very similar to absolute return and enhanced income funds, though are slightly more risky. They aren’t as well diversified and are therefore less able to smooth out risk.

Now you know: If you’re looking for the type of unit trust that can ride out just about any market wave, invest in prudential fund unit trusts. They give you exposure to a variety of assets and keep your risk down. 

Looking for the best asset allocation mix? Then prudential funds are the best unit trusts to invest in
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