What is a Unit Trust?

A unit trust is a collective investment scheme that allows investors to pool their resources which as a normal investor they would not normally be able to do. For example a unit trust provider decides to open a unit trust dealing in Japanese companies.  At launch 15 million is raised from investors and this is then invested by the provider in possibly as many as 100 japanese companies. As more investors choose to buy units more units are issued and the fund manager then invests those funds in more companies or by increasing the holding in existing companies. Because the funds are pooled it gives the investor the ability to gain a greater exposure to a range of diversified shares than if they were investing themselves directly and because they are a professionally managed investment they do cater for basic investment needs.  Because unit trust investments are often invested in stocks and shares it is normally recommended that investors should be looking to invest for a minimum of 5 years and ideally more as stock markets can rise and fall. There is normally no maximum you can invest although there are minimums and as an example Legal and General have a minimum for lump sums of £500 or £50 per month if you want to make a monthly investment. Reasons people choose to invest can range from things like forward planning for childrens education, retirement planning and the opportunity to invest in the stockmarket and potentially get higher returns than a traditional building society savings account. But be aware that the value of your investment will be based on the daily unit prices and it is possible that your unit trusts value could go down and you might get back less than you originally invested.

How do i buy a Unit Trust or invest in a unit trust ?

To buy a unit trust the first thing is that you must be over the age of 18. You can buy the unit trusts from a unit trust management company directly or financial advisor, stockbroker of fund supermarket and for instance if you want to invest £500 the price per unit will be divided into this figure and that is the quantity you will have. You can normally choose to buy a lump sum or alternatively can set up a monthly standing order to buy for instance £50 each month. If you set up a monthly standing order the quantity purchased will vary each time according to the prevailing price of the unit trust. Like shares a unit trust has one price to buy and one to sell.

Who are the leading providers of Unit Trusts in the UK?

Providers of unit trusts in the UK include, Fidelity, Legal and General, Jupiter, New Star, M&G, Aviva, Aberdeen, AXA and Schroder to name but a few. In the UK the asset management business is estimated to have £3000 billion invested. (including pension funds, shares ISA's and authorised investment funds.

Legal and General Unit Trusts