By Mduduzi Vilakati on January 25,2010
We have discussed this topic on numerous occasions, but it does not cease to amaze me that every single week I come across people who have never heard of unit trusts. Or those who think unit trust investing is for the sole reserve of the extremely wealthy!
Or those who have heard of them but thought they were yet another investment con! I am hopeful that going over the basic principles of unit trust investing will help dispel some of the misunderstandings held on the subject.
What are Unit Trusts?
A Unit Trust Fund provides investors with a simple and straight forward way to enter local, regional and international investment markets, benefit from professional fund management and diversify risks, so as to achieve superior investment returns. Risks are reduced by spreading investments over a range of shares, bonds, cash and regions. A unit trust is essentially an investment vehicle, which pools together the money of investors into one large fund. A professional team of fund managers invest and manages the fund on your behalf. In this way, individual investors can enjoy the same earnings and diversification of risk opportunities that usually only larger investors can enjoy.
Superior
Investment Returns
There are two main components of returns from a unit trust; namely capital and income growth. Capital growth measures the increase in the value of the underlying assets held by the fund and income growth includes interest and dividends received. In this way, investing in a unit trust offers you superior medium to long-term investment returns when compared to other forms of traditional investments.
Security of Investing
The relevant authorities in the respective country regulate Unit Trusts where the fund is domiciled. In order for a unit trust fund to operate in Swaziland, it has to meet certain requirements and also needs approval by the Capital Markets unit within the Central Bank of Swaziland. The operations of the fund should comply with a comprehensive public Trust Deed under the guidance of Trustees or Custodian. Unit Trust Funds are independently and externally audited.
Professional Fund
Management
Few people have the necessary time, skills or experience to actively manage their investments and to research the best ways to make the most of their money on a day-to-day basis. With unit trusts, you gain access to expert management by trained professionals with historical track records of consistent returns.
Easy Withdrawal
and Convenience
Should you require cashing in your investment, you may withdraw part or all of your investment on any business day at normally no additional cost. As an investor you are constantly updated on your investment with prices quoted daily in the local print media.
Other benefits of investing
* Unit Trusts can assist you accumulate the necessary funding to cover the increasing cost of education for your children;
* As Unit Trusts are medium to long term investment vehicles, investors are able to provide themselves with an additional benefit at retirement;
* Investing in a Unit Trust helps to set aside the cash for a “rainy day” or unexpected emergencies;
Fortunately unit trust funds are widely available in Swaziland and African Alliance is one of the institutions that offer a wide range of products that are suitable for our various wallet sizes, investment horizons and appetites for risk. You can initiate your unit trust investment with as little as E200 per month.I f you wish to enquire further, please feel free to contact me on vilakatim@africanalliance.sz. Your contributions are most appreciated.
From TIMES OF SWAZILAND published on January 25, 2010
