What is Unit Trust

So you’ve decided to invest into your first unit trust fund. Now before you purchase your first investment in unit trust its better to know what you’re getting into.
Unit Trust or Mutual Funds are collective investment scheme, which pools the savings of investors with similar investment objectives in a special “trust” fund managed by professional fund managers.

The pooled monies in the unit trust fund will then be invested in a diversified portfolio of securities and other assets in accordance with the unit trust fund’s investment objectives and as permitted under the Securities Commission’s (SC) Guidelines on Unit Trust Funds.

Now the investments can be in Equities, Bonds or Money Market instruments.
Equity based Unit Trust funds are the more popular investors compared to other Unit Trust funds because it give opportunities to investors to invest into the stock market.

Now lets imagine, if you have 10,000 and want to invest in the stock market, and have decided to invest in Stock A which each stock cost about 10.00 you could only buy 1000 units or 1 lot.
If you invest the same money in a Unit Trust fund, instead of investing in one stock, your money will be spread over ~50 stocks  (depending on the fund) because the fund uses the pooled money from other investors to buy this stocks.

The investment scheme of a unit trust fund can be illustrated as a tripartite relationship between the manager, the trustee and the unitholders.

The manager is responsible for the management and operations of the unit trust fund whilst the trustee holds all the assets of the unit trust fund.

The obligations and rights of each of the three parties are specified in the Deed, (a legal document entered into between the manager and the trustee, and registered with the SC).

The Deed regulates the duties and responsibilities of the manager and the trustee with regard to the operations of the trust fund and protects the unitholders’ interests.
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