• Instead of buying shares or bonds directly, one can invest in a unit trust.
• A unit trust is an investment vehicle that allows a group of investors to invest together / pool their funds.
• Asset managers, insurance companies, banks and even some brokers offer investors unit trust products.
• A unit trust is not part of the company managing it but is a separate entity. It has a trust deed which defines what the investment goals (objectives) of the unit trust are. The Trustees of the unit trust are responsible for ensuring that the unit trust is properly managed.
• Namibian unit trusts must comply with the Unit Trust Controls Act and are regulated by NAMFISA.
• The unit trust uses the money that it has received from its investors to buy shares, bonds or cash instruments.
• The investment objective of the unit trust will determine the kind of assets that the unit trust invests in. If the objective is conservative, the unit trust will invest in more “safe” assets but will, over the long-term, earn less interest than a unit trust with an aggressive objective which invests in more risky assets.
• By investing in a unit trust, the investor gets exposure to a lot of different investment assets (diversification). This would be very difficult to do directly, unless you have a lot of money available to invest. The investor is also paying the unit trust manager to make investment decisions on his behalf.