What is unit trust?

A unit trust is an open-ended investment, where an unlimited number of investors can invest their money into a single fund, that's managed by a dedicated fund manager.

The fund manager will invest in a portfolio using money from multiple investors, who each receive 'units' from that portfolio.

Where have you heard about unit trust?

You may have heard of a mutual fund - a pool of different investors' money - when looking to invest. A unit trust is the UK equivalent of a mutual fund in the US.

What you need to know about unit trust.

A unit trust allows an investor to have a balanced portfolio, from a relatively low financial investment.

An investor can give their money to an expert fund manager, and request some parameters behind how they'd like the money to be split (for example, between cash, shares and bonds). The fund manager will purchase securities using money from this investor and others, and build a portfolio. This portfolio is then split into units, with each individual investor being given a unit representative of the money they put in.

The investor's units will generate returns, if the fund manager is successful in their investments.

Much like all investment, there is risk. But unit trust gives investors with less money, and less expertise, the opportunity to have a balanced investment portfolio with an experienced fund manager behind them.

Remember, where there is the opportunity for profit, there is always the chance of loss.