Article from Just Money
INTRODUCTION:
A unit trust is the pooled money of many investors that is invested in the financial markets through a single collective investment scheme. Unit trusts invest in different markets and market sectors, while some invest across markets.
Access
to trading in unit trusts has long been a technically challenging and costly
exercise, diluting the returns on investments and discouraging individual
investors. Investonline.co.za was launched with the express aim to give
individuals easy and affordable access to this important investment vehicle.
The
Investonline.co.za solution allows you, via their online portal facility, to
take ownership of your unit trust investment portfolio at a fraction of the
prevailing industry charges. Choice, flexibility and transparent access to a
range of underlying unit trust funds on one administrative platform,
consolidated reporting and the ability to switch between underlying funds, and
to construct portfolios and re-balance easily and cost-effectively, are
compelling reasons for investors to use Investonline.co.za to invest in unit
trusts.
What are the benefits
to investing in unit trusts?
1.Safeguard
A
unit trust fund has an investment mandate, which is a legal contract that sets
out the fund’s investment aims. The mandate will give you an idea of whether
the fund is a low-, medium- or high-risk investment. Funds appoint trustees
(usually a bank or financial institution not affiliated to the unit trust
company or fund manager) to look after the cash, shares or bonds that your fund
owns.
The appointment of trustees means that even if the unit trust management company goes under, your money will still be safe because it is held in a trust. In terms of the Collective Investment Schemes Control Act (Cisca), unit trust funds are not allowed to invest more than 10% in the shares of unlisted companies.
2.Recourse
A
unit trust fund is part of a well regulated industry and you have recourse if
anyone tries to defraud you. Unit trusts are regulated by Cisca, which replaced
the Unit Trust Control Act in 2002.
The
Financial Services Board (FSB) regulates the unit trust industry and all unit
trusts that are marketed in South Africa must be registered with the FSB.
3.Professional expertise
When
you invest in a unit trust, you have access to the expertise and services of
investment professionals known as asset managers or fund managers, who
specialise in managing investments. They use the pool of money to buy
underlying investments, such as shares, bonds and cash or a combination of these
assets - on either the local or foreign market, depending on the type of fund
in which you invest.
Fund
managers are more likely to make sound investment decisions and stock picks
than you are, because they have the expertise and experience.
4. Track performance
You
can track the performance of your unit trust fund on a daily basis on
investment websites or via the press. Personal Finance publishes a unit trust
performance table every weekend in the Saturday newspaper.
The
Personal Finance unit trust performance table publishes the return of your
investment over one-, three- and five-year periods. It is a good idea to look
at the performance history of a unit trust fund over the longer periods before
you choose to invest in that fund.
To
calculate the value of your investment, simply multiply the number of units you
own by the unit price, or NAV.
5. Diversification
Pooling
your money with that of other investors who have similar investment goals
allows you to own a diverse range of investments at a low cost.
Many
individual investors do not have enough money to invest directly in the range
of underlying assets that unit trusts offer you at a low cost.
Unit
trusts also give you access to investments, such as bonds, that have high
minimum investment amounts that may be beyond your reach.
The
advantage of being diversified across a broader range of shares, bonds or other
securities is that your investment risk is reduced. For example, if one share
or market sector does not perform well, this may be mitigated by the strong
performance of other shares or sectors in which the fund is invested.
6. Easy access to your money
There
are no minimum investment periods when you invest in a unit trust, and you can
cash in your unit trust investment at short notice.
You
will be paid the value of the units on the day your request to disinvest is
processed. This is usually the same day if you submit your request timeously,
or on the next working day. The money is usually paid into your bank account
within 24 hours of the units being sold.
Depending
on the type of funds in which you invest, it is considered prudent to leave
your money invested for about three to five years in order to recoup the
investment costs and to ensure an appropriate return.
7. Interest income and tax
You
can earn interest and/or dividends when you invest in a unit trust, depending
on the type of fund in which you invest. Individual funds decide whether to
declare these earnings monthly, quarterly or six-monthly.
You
can choose to have the interest or dividends paid out to you or reinvested in
the unit trust, which will increase the number of units you own.
You
may be taxed on the interest you earn from your investment and you may also pay
capital gains tax (CGT) on the gains you make when you sell your unit trust
investment.
The
tax you pay will depend on the applicable exemptions and on your tax bracket.
The
CGT exemption for the 2009/10 tax year is R17 500. The exemption on interest
income for the 2009/10 tax year is R21 000 if you are under 65 years old and
R30000 if you are aged 65 and older.
Why Investonline?
1. Choice
There
are more registered unit trust funds in South Africa (over 900) than there are
shares currently listed on the J.S.E. (Johannesburg Stock Exchange) which makes
it critical to have professional assistance in selecting and structuring your
investment portfolio of unit trusts. Investonline.co.za has structured
risk-profiled and diversified unit trust investment portfolios from the
top-performing unit trust funds in South Africa to assist our online clients in
selecting the better performing funds at an exceptionally affordable cost.
2. Online convenience
More
and more clients are happy to transact online for convenience and affordability
in the transaction process. As long as you have internet access, you have the
convenience of monitoring your portfolio. In short, you are able to manage your
unit trust portfolio online, at any time, at a very competitive fee.
3. Substantial cost savings
Investonline.co.za
is one of the first companies in South Africa to pass on wholesale prices when
you buy unit trusts. This results in substantial savings relative to the usual
3.42% - 5.70% upfront fee charged by most investment providers.
Investonline.co.za
has zero upfront fees.
The
following factors enable Investonline.co.za to reduce fees and pass savings on
to the client:
By
clients transacting online, Investonline.co.za is able to remove any upfront
fees. Effectively you are now in charge of your own investment portfolio via
our website.
The
investment management portfolio fee rebates are passed directly back to you
which results in an average annual 0.40% p.a. savings to you on your total
investment amount.
The
inherent efficiencies of the internet and the very competitive fee structure of
our selected investment platform (managed by Allan Gray) allows for attractive
savings on the administrative costs typically incurred in the unit trust
investment industry.
4. Independence
The
portfolios selected are well diversified and have been independently selected
by Investonline.co.za on a best-advice basis and on proven, historical
track-record performance where fund managers have demonstrated their ability to
manage downside equity market risk over time.
5. Safe and secure
Investonline.co.za
is a FSB (Financial Services Board) registered, approved & authorised financial
service provider under Licence FSP 40592.
The
Investonline.co.za website is internet secured and protected by Thawte Digital
Certificates.
The
directors of Investonline.co.za - Nick Brummer C.A. (SA) & Rod Lowe B.Com
(Hons) C.F.P. - both have 20 years experience in the investment and financial
services market in South Africa.
Investonline.co.za
is responsible for the investment advice on their website and Allan Gray is
responsible for the administration of your unit trust investments once the
application form has been received by them.
Allan
Gray investment platform is an authorised administrative financial services
provider. As the administrator, Allan Gray will collect your funds
electronically from your bank account and invest your funds into the respective
underlying unit trusts selected on the Allan Gray investment platform once your
application form has been received.
Tailor made investment
options
The
Investonline.co.za risk profiler tool assists clients in choosing the correct
suite of unit trusts (or unit trust portfolio) that best suits their profile as
an investor.
The
portfolio of funds is based partly on historical performance, but mostly on
selecting the best quality fund management companies and individuals whom
Investonline believes should outperform their peers in the long-term. By
selecting a portfolio of three to four unit trust funds from a nucleus of 45
funds Investonline clients have a competitive advantage over the alternative
investment routes available. Furthermore, clients can be confident that the
nature of their advice is independent.
Article from Just Money
