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Three questions to help you identify the best unit trust for your money

by , 05 August 2014

Unit trusts are an easy way of adding some diversification to your portfolio. And you can invest from a small monthly amount.

So how do you go about picking a unit trust to invest in from the hundreds available?

You should ask yourself these three questions…


Question #1: Do I like the asset class the unit trust invests in?


There are unit trusts available on a number of different asset classes. They range from focusing on the biggest companies on the Johannesburg Stock Exchange to companies that pay good dividends.

But bear in mind that if you’re looking for a unit trust that replicates the performance of the underlying market, you might be better off looking at a tracker exchange traded fund (ETF). The fees associated with ETFs tend to work out cheaper than a comparable unit trust.


Question #2: How is the unit trust performing?


By investing in unit trusts, or any other security, you want to grow your wealth. You want your money to grow, after fees.

So you need to look at the strategy of the fund, David C Stevenson in Money Week explains. All unit trusts have a fact sheet, which you can get off the fund manager’s website.

Have a look at this and see if the unit trust is meeting its objective over the last few years.


Question #3: How much will the unit trust’s fees cost me?


Over the years, unit trusts have received much criticism about the high fees they carry. High fees erode your returns.

If there’s a certain type of unit trust you’re looking for, weigh up the different ones on offer from different fund managers. You can see how the fees vary and you can use this information to help you select a unit trust.

You can get all the information about a unit trust’s fees from the fund’s factsheet.

So there you have it, three questions to help you identify the best unit trust for your money.

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Three questions to help you identify the best unit trust for your money
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