Jun
Unit Trust Funds
Unit trust investments are handled by a registered investment company which has a portfolio of bonds, stocks and other securities.
Investors wishing to buy units from the investment company become unit holders of the investment company. They are then able to see the principal amount invested grow and are also eligeble to receive dividends or interest on their investment.
A company investing in long-term bonds could have the investment running for 20 years or longer, whereas as a company investing in stocks could seek to increase its capital over a period of several years. So it is important to know that there is a fixed period for each type of unit investment trust purchased.
Individual investors who may initially wish to keep their investment in UITs until the trust is dissolved, are still able to sell their units whenever they may wish to do so.
Legislation requires that companies must buy back these UITs from investors at their net asset value which fluctuates according to daily market values.
There are different types of UITs which can be purchased according to the needs and risk profile of the investor.
For an investor seeking a fixed income from their investment without the tax burden there are tax free municipal bonds. One should note that there are both taxable and tax free bonds that can be invested in.
There has been in recent years a large growth in equity based UITs, but remember this type of investment is highly speculative especially in times such as these when markets have dropped significantly.
Historically though it has been shown that equities always performed well over a longer period of time easily outperforming inflation levels.
Some companies seek to invest in certain areas of the economy such as telecommunications, health and technology, looking for capital appreciation from these segments of the general economy.
One should note that the securities held by a unit investment trust company are always stated in the prospectus which it issues.
As with any other investment, the risk profile, age and current financial needs of the prospective investor should be carefully considered before purchasing a UIT.
There are many other types of investments one can look at, but there is one particular type of investment that always seems to be the most popular for those who enjoy a bit of risk, and when done properly, there can be little or no risk, and that is investing in foreign currency trading!
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