Investing in unit trusts

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Thandi Ngwane, Head of Strategic Markets, Allan Gray

There are a number of products in which you can invest your savings. In the latest print edition of TRUE LOVE we looked at using unit trusts, one of the most convenient investment products available.

Unit trusts are a popular choice among investors and may suit your investment needs. Not only do they provide access to experts, skilled in managing money, they are also flexible. You can either invest a lump sum or make regular monthly contributions. Your money is always accessible because you can cash in your investment or a portion of it, when you need to, at any time, without penalties.

Unit trusts and other investment products

While you can invest directly into unit trusts, you can also invest in them via other investment products. The products listed below produce investment returns. They all take your money and invest it into your choice of unit trusts, which form the basis of your investment.

•  A retirement annuity fund: Allows you to save for retirement in a tax-efficient manner.
•  A preservation fund: Allows you to preserve and grow your existing retirement benefits when you leave your employer.
•  A living annuity: Allows you to draw an income from your investment after you retire.
•  An endowment policy: Allows you to grow your money and benefit from an estate-planning tool. Endowments are generally more suitable for higher income earners, as they are currently taxed at 30%.

The underlying unit trusts are responsible for your investment performance, while the products dictate the rules around tax, accessing your money, estate planning advantages, and so on.

Every unit trust has a legal contract that sets out its investment objectives and how it intends to invest to achieve these objectives. Experienced investment experts use the pool of money to buy various assets such as shares, property, bonds, etc. or a combination of these on local or foreign markets (depending on the type of unit trust and its stated objectives).

Choosing unit trusts

When choosing a unit trust, it is important to be clear on your investment objectives at the outset and understand the fund or suite of funds you’re planning to invest in. Then, once you’re invested, try to minimise moving your money in and out of funds too often, which often destroys the value of your investment. If you don’t feel confident making investment decisions on your own, youmay benefit from seeking the advice of an independent financial adviser who will be able to help you choose the right unit trusts for you. For more information on investing with unit trusts visit www.allangray.co.za/investingexplained/ Do you have any investment-related topics you would like to learn more about? Send an email to circleoffriends@allangray.co.za and we’ll do our best to address popular themes in this column.

Allan Gray Proprietary Limited is an authorised financial services provider.

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