What is Unit Trust?

A unit trust is a financial vehicle through which individuals may invest their money. The idea behind unit trust is better investment through collective investing. That is to say pooling the investments of many investors, individuals and institutions.

Many individuals deposit money in the banks, for which they receive interest. These individuals expect complete liquidity where they must be able to withdraw their deposits in cash at any time. The banks employ professional managers to look after the deposits. The deposits are invested. These managers lend the deposits to other individuals requiring funds and a host of other profit generating facilities of the banks

Similarly, unit trust holders wish to put their money to generate higher returns. The goal of all investments is to make money more productive, either through producing income or growth. Unit trust holders have liquidity because their units can be readily converted into cash at any time. By investing in unit trusts, it allows them to engage professional fund managers at a low cost to the individual investors. These managers diversifies the investible funds in many different securities and other approved channels to spread the risk.