Unit Trust

A unit trust is a collective investment vehicle that allows investors to pool money. It is open ended like an OEIC so the size of the fund grows or shrinks as investors add money to it or withdraw money from it.

Unit trusts always have an annual management charge. There may also be initial or exit charges. There is also a difference between the buying and selling prices, which are set by the manager of the unit trust.

The cheapest way to buy unit trusts is through a discount broker or a "money supermarket", as the initial charge is eliminated or greatly reduced. This is because the initial charge is commonly used to pay sales commissions. The low cost sales channels refund the commission they receive to customers.

Copyright Graeme Pietersz © 2005-2020