A unit trust is a type of collective investment scheme common in the UK. It is similar to an open-ended investment company (OEIC) but, unlike an OEIC, each investor in a unit trust owns a discrete number of units.
The number of units an investor owns depends on the amount of money they have invested and the price per unit at the time of their investment. Unit trusts are managed by investment managers who make all decisions about where to invest the money.
The performance of a unit trust will depend on the underlying investments made by the manager. Unit trusts can be bought and sold on stock exchanges or directly from the fund managers. Many fund managers also offer ‘ Isa’ versions of their funds which allows investors to hold the units within an Isa wrapper and thereby shelter them from capital gains tax and/or income tax.
As with other types of collective investment, there will be charges associated with investing in a unit trust which will eat into any returns achieved. These charges can vary substantially so it is important to check them before investing.
Unit trusts can offer investors diversification and professional management at a reasonable cost. They are therefore a popular choice for many people looking to invest their money. However, as with all investments, they carry risk and you should always ensure you understand these before committing your money. Get Investment advice before making any big decisions with your finances.