Have you chosen the correct unit trust?

Have you chosen the correct unit trust?

Thinking of embracing your entrepreneurial spirit and starting a business? Saving and investing are two vital elements that you may not feel are a priority, but they are. Unit trusts offer you an easy way to access financial markets and begin the savings and investment process.


What needs to be understood is that when starting a business, you should have short-, medium- and long-term financial goals – investing in unit trusts generally falls into the long-term category. 


The benefits of unit trusts include but are not limited to:


  • Diversification
  • Affordability
  • Flexibility
  • Liquidity


It’s best to speak to an independent financial adviser (IFA) about selecting the right unit trusts to suit your business needs savings and investment.


It’s typically recommended you review your unit trust investments on an annual basis to determine whether they’re on track to helping you achieve your goals – what should you do if they’re not? It’s important that you don’t let emotions take over rational thinking. The last thing you want to do is make impulsive decisions that may be harmful to your investment. So, what should you do? 


Before investing in a unit trust, it’s essential to research the different options carefully so you have a complete understanding of them. It should be understood that periods of volatility are likely to happen – particularly over the short term. When this happens, it’s recommended you keep a level head. Any adjustments to your investment should only be made if your financial goals or personal circumstances change, such as getting married, having a child, or saving for education.

Also read: KissCartoon Guide , and answers to all your questions

How to select a unit trust or evaluate your decision


Investment managers are required to publish minimum disclosure documents for each fund that they manage. These are called factsheets and they provide you with an overview of the unit trust’s features, objectives, and approaches to achieving them. In addition, up-to-date performance, risk and fees should be shown. 


Here are vital points to read on an investment’s factsheet.


  • Time horizon (period of investment)

The factsheet should tell you if the unit trust is suitable for long- or short-term investment and reveal the recommended investment period. It’s essential to check that the number of years you intend to invest aligns with the timeframe of the unit trust.


  • Maximum drawdown

The maximum drawdown (the unit trust’s maximum percentage decline over any period) should assist you in assessing the possibility of money you may lose. You then need to assess whether you can afford to take this risk.


  • Highest and lowest annual returns

You need to decide if you’re entirely comfortable experiencing potential market fluctuations that could take place during the investment time horizon. The highest and lowest annual returns that are shown on the factsheet should give you an approximate idea of the range of returns that can be expected while you’re invested in the unit trust.

Should you find a discrepancy between your expectations and the outlines shown on the factsheet, you may have invested in the wrong unit trust. Should this be the case, reassess, with the help of an IFA, if necessary. 

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