The person who starts simply with the idea of getting rich won't succeed; you must have a larger ambition - JOHN D. ROCKEFEL
We all have different goals in life and there are different ways to achieve these goals. Unit trust provides an easy and affordable ways to plan one’s investments. The key question then becomes what are unit trusts and how do they operate. In very simple terms unit trusts are pooled funds with a very specific investment mandate driven by the overall objectives of the fund. They are established as trusts and are regulated by the Capital Markets Authority. Unit trusts invests largely in securities that are both regulated like quoted stocks, government bonds and bank deposits and unregulated products like some commercial papers and bonds. Below are some of the key advantages of investing in unit trust funds:
1. Help create some savings discipline: One can create standing orders that go directly to the unit trust fund and so does not need to think about the investments in future;
2. Access to a diversified portfolio: Given many people are pooling in the funds, they can be invested in different asset classes helping with diversification that reduces the risk;
3. Enhanced returns: Compared to savings rates unit trusts have registered above average return with the averaging about 10% over the one year compared to the 3% that you get from the savings account;
4. Access to affordable fund management services and enhanced financial management training: Most fund managers as a value addition strategy they give free trainings to their clients on how to manage their finances. One also gets to have their funds managed by professionals who would be costly if one was to seek their services directly;
5. Affordability: for most funds the minimum amounts have become low making it easy for most people to interact with this product and invest in
them;
6. High Liquidity: One has easy access to their cash without losing value. We have seen many fund managers adopt digitization and integrated the funds with the mobile money making it easy for one to access their cash wherever they are.
When deciding which type of unit trust fund to invest in below are the key considerations:
1. Your Risk appetite: In Investment most of the time risk is inevitable but it is good to understand oneself in terms of how much risk they can withstand. Generally, risk is
the probability that the investment you have does not yield the returns that you expected. If you do not want to take much risk then consider in lower risk unit trusts like money market and fixed income funds;
2. Return projections: It is good to go for the investments that offers the very best returns at the measured level of risk. Like Benjamin Graham said the aim of
sherewed investment should be to find opportunities which offer larger returns than the average combined with the adequate safety. The returns projections helps
us determine which particular fund to invest in and which provider to go with;
3. The minimum investments amount: At times some funds we would wish to invest in asks for huge minimum investments which might not be our reach but lately we
have seen a lot of change towards reduction of the initial investments amounts and with small amounts to start one can start the journey;
4. The ease of accessing you cash: Generally, unit trust are very liquid and one can easily access their cash within two to three days. Lately with the adoption of technology the liquidity cycle has even reduced and their instant withdrawals for amounts that can be withdrawn via the mobile application
Given that all the legal structures are generally the same, when deciding which unit trust to go with then the key considerations should be:
1. The historical return the fund has generated one can be able to get this kind of data from the regulators website and also they are published in the national dailies.
2. The reputation of the sponsor and the other service providers. Most of the players in the market are regulated and they include the trustees, the fund managers,
custodians. One need to ensure that they make themselves comfortable with these people.
3. Adoption of technology by the particular fund: Investments and access to ones investment should be hustle free and it is for this reason that one should look how
technologically driven are the funds one is investing in are.
The unit trusts is the easiest and safest way for any investor to start engaging with the capital markets before they can access the other direct investments in the market. The main reason being starting small learning the process as you wait to jump all in.
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