Why Invest in a Unit Trust?

• Flexible – No fixed investment period; you can increase, decrease, or stop contributions at any time.
• Accessible – Suitable for both beginners and experienced investors.
• Variety – Wide range of funds available, from low-risk money market funds to high-risk equity funds.
• Cost-effective – Lower fees compared to traditional stockbroking services.

How Do Unit Trusts Pay Out?

Unit Trusts pay out returns in two ways:

• Income distributions – If the fund generates interest, dividends, or rental income, it may distribute earnings to investors in the form of cash or reinvested units.
• Capital growth – If the unit price increases over time, you can sell your units at a higher price than what you paid, making a profit.

Is a Unit Trust a Good Investment?

Yes, a Unit Trust is a good investment option for individuals looking for diversification, affordability, and professional fund management. It allows investors to pool their money together into a fund, which is then invested across multiple asset classes such as stocks, bonds, property, and money markets.

Benefits of investing in a Unit Trust:

• Diversification – Spreads risk across multiple assets.
• Affordability – Suitable for investors with small or large capital.
• Professional management – Experienced fund managers make investment decisions on your behalf.
• Liquidity – Can be bought or sold easily.
• Regulated – Offers investor protection under South African financial laws.

How Do I Sell My Unit Trust Investment?

You can sell your Unit Trust anytime by requesting a withdrawal, and funds are typically paid out within a few days.

Understanding Unit Trusts helps you make informed decisions to maximize your investment growth and financial security.

Do Unit Trusts Offer Offshore Investment Options?

Yes, some Local Unit Trusts have offshore exposure, allowing diversification into global markets.

How Do Unit Trusts Compare to Fixed Deposits?

• Unit Trusts offer higher return potential but market risk
• Fixed deposits provide guaranteed returns but lower growth

Can I Invest in a Unit Trust with a Lump Sum?

Yes, you can make a once-off lump sum investment or contribute monthly based on your financial goals.

What Is the Minimum Investment for a Unit Trust?

Minimum investments vary by fund but can start from as little as R500 per month or a once-off lump sum.

Can I Reinvest Dividends From a Unit Trust?

Yes, most Unit Trusts allow you to automatically reinvest dividends, boosting long-term returns.

How Often Do Unit Trusts Pay Out Returns?

• Income funds may pay monthly, quarterly, or annually
• Growth funds reinvest earnings to maximize capital gains

What Are the Risks of Investing in a Unit Trust?

• Market fluctuations can affect returns
• Inflation risk if not properly diversified
• Fund performance varies by investment strategy

Can I Use a Unit Trust for Retirement Savings?

Yes, many investors use Unit Trusts to build long-term retirement savings outside traditional pension funds.

What Happens to My Unit Trust If I Pass Away?

Your Unit Trust investment is transferred to your estate and distributed according to your will.

Can I Have Multiple Unit Trusts?

Yes, you can invest in multiple Unit Trusts to diversify across different asset classes and risk levels.

How Liquid Are Unit Trusts?

Most Unit Trusts offer high liquidity, allowing investors to buy or sell units at any time.

Are Unit Trusts Good for Long-Term Investments?

Yes, Unit Trusts are ideal for long-term wealth growth, benefiting from compound returns and market appreciation.

What Are the Costs Involved in Unit Trusts?

• Management fees for fund administration
• Performance fees for actively managed funds
• Transaction costs when buying and selling units

Can I Transfer My Unit Trust to Another Provider?

Yes, you can switch your Unit Trust to another provider without needing to sell your investment, depending on the fund's rules.

Can I Invest in Unit Trusts for My Children?

Yes, some providers offer Unit Trust accounts for minors, allowing parents to invest on behalf of their children to build long-term wealth.

Do Unit Trusts Have Hidden Fees?

Most Unit Trusts have transparent fees, but you should still check:

• Annual management fees – Charged for managing the fund.
• Performance fees – Some funds charge extra if they outperform the market.
• Transaction costs – Fees when buying or selling units.

Advisor fees is a separate discussion.

How Long Should You Invest in a Unit Trust?

• Short-term (1-3 years) – Money market or income funds for stability.
• Medium-term (3-7 years) – Balanced funds for growth with moderate risk.
• Long-term (7+ years) – Equity funds for higher growth potential.

Can You Lose Money in a Unit Trust?

Yes, Unit Trusts are subject to market fluctuations, meaning their value can rise or fall. If the market declines, the unit price may decrease, leading to potential losses.

Are Unit Trusts Safer Than Stocks?

Yes, Unit Trusts generally carry less risk than investing in individual stocks because they offer diversification. However, the risk level depends on the type of Unit Trust—equity funds are riskier, while money market funds are more stable.

How Do I Choose the Best Unit Trust?

• Consider your risk tolerance (low, moderate, or high risk).
• Check historical performance, though past performance doesn’t guarantee future returns.
• Understand the fees and charges, including admin and fund management fees.
• Look at the fund’s objective to see if it aligns with your investment goals.
• Speak to a financial advisor for personalized advice.

Types of Unit Trusts: What Options Do You Have?

• Equity Unit Trusts – Invest primarily in stocks and are higher risk, higher reward.
• Balanced Funds – Invest in a mix of equities, bonds, and cash to balance risk and return.
• Money Market Funds – Focus on short-term, low-risk investments and provide stable returns.
• Income Funds – Invest in bonds and other interest-bearing assets to generate regular income.
• Global or Offshore Funds – Invest in international markets for diversification and exposure to foreign currencies.
• Sector-Specific Funds – Invest in a specific industry, like technology, healthcare, or property.
• Shariah-Compliant Funds – Follow Islamic finance principles, avoiding interest-based and unethical investments.

What is the Difference Between Unit Trusts and Mutual Funds?

• Unit Trusts are open-ended funds where investors buy or sell units based on the net asset value (NAV) at any given time.
• Mutual Funds operate similarly but are typically more common in the U.S. and may have additional restrictions, such as minimum investment requirements and trading only at set times.

Do You Pay Tax on Unit Trusts in South Africa?

Yes, tax applies to Unit Trusts in the following ways:

• Capital Gains Tax (CGT) – When you sell units for a profit, CGT applies on the gain.
• Dividends Tax – If your fund earns dividends from shares, a 20% withholding tax is deducted before distribution.
• Income Tax – Interest earned from bonds or money market investments is subject to tax.

How Much Interest Does a Unit Trust Pay?

Unit Trusts do not pay a fixed interest rate like a savings account. Instead, returns depend on the performance of the underlying assets. Returns can come from:

• Capital appreciation (growth in unit value)
• Dividends from stocks
• Interest from bonds or money market instruments

Can I Withdraw Money from My Unit Trust Account?

Yes, Unit Trusts are liquid, meaning you can withdraw your money at any time. However, the withdrawal amount is subject to the current unit price, which may be higher or lower than when you initially invested.

How Do Unit Trusts Work in South Africa?

In South Africa, Unit Trusts are managed by financial institutions and operate as pooled investment funds. Investors buy units in a fund, and the value of these units fluctuates based on the performance of the underlying investments.

How they work:

1. You invest money – You buy units in a chosen fund based on the unit price at the time.
2. The fund manager invests – The fund manager spreads your money across different assets according to the fund’s objective.
3. Your investment grows or shrinks – The unit price rises and falls based on market performance.
4. You can sell your units – When you need to withdraw, you sell your units at the current price.