Unit Trust Funds and How to Improve Them

Once you start piling some extra cash from your income after completing your expenses, you begin to think about ways of growing your capital rather than it remaining stagnant in the bank. A typical solution is to invest in something different than what you specialize in.

This may be a problem as you may not have the necessary knowledge in these areas. This is where unit trusts such as https://www.ocbc.com/personal-banking/investments/unit-trusts/find-our-selected-funds come in. How to maximize the use of these trusts is discussed in detail below.

Unit Trust Funds and How to Improve Them

What are Unit Trusts Funds?

Unit trust funds are platforms that offer investment opportunities by compiling capital from multiple investors and through professional fund managers invest the money in various securities like bonds, stocks, and other authorized securities.

The investors earn income in interest, dividends, or capital gains depending on the type of asset the fund invests in. They are given units representing the portion of the security portfolio in place of the capital invested.

Unit trust funds are governed by relevant national authorities and must have a trustee, a fund manager, and a custodian.

Trustees’ role is to make sure the interests of investors are always prioritized.

A fund manager manages, administers, and makes sure the capital from the investors is invested according to the fund’s investment guidelines.

A custodian is a company, typically a bank, approved by relevant authorities to safely keep the assets of the entire unit trust.

Unit trusts funds are of multiple types, including:

  • Equity Funds
  • Money Market Funds
  • Balanced Funds
  • Fixed Income Funds

The various ways that can be undertaken to maximize unit trust funds include:

Small vs. Large Companies

Smaller companies are typically less established than their counterparts, meaning they carry more risk. They have smaller operations, riskier bank loan candidates, minimal track record, and decreased inventory.

Unit Trust Funds and How to Improve Them

However, small to midsize companies’ type of investment portfolio has proven to outperform large companies due to their ease of flexibility while alleviating some concerns involving small companies.

Equities over Bonds

Bonds typically have less risk than equities. A manageable combination of the two investment options can provide you with increased returns with relatively low volatility.

Value vs. Growth Companies

Value companies have been known to perform better than growth companies anywhere globally. The value effect has made portfolios that focus on value companies more profitable than those of growth companies.

This is because growth stocks have relatively higher prices compared to their accounting measures as they are considered fast-growing with little regard for dividend payouts. On the other hand, value companies have lower stock prices than their underlying accounting measures like earnings and sales.

Managing your expenses

Investment in your portfolio depends on the management method used.

Active management involves professional technicians and analysts that aim at predicting future investment returns to reach specific targets. Passive management is not that involved either way, most managers do not reach their targets, and they save on capital used by these analysts.

The most significant advantage of unit trust funds is how they can quickly diversify from various asset classes reducing overall risk through the asset class correlation. For any questions about Unit Trust Funds, check out the link for our website above.

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