Unit Trusts
Unit trusts are open ended, collective investments. A unit trust is open ended because the number of 'units' in each trust will vary according to supply and demand. It is collective because it puts together monies from many different investors which is then looked after by a professional investment manager. It is the job of the fund manager running unit trusts to make sure the money is invested properly and to deliver to investors the very best returns given market conditions.
What do unit trusts invest in?
Most unit trusts use the money given to them by unit holders to buy ordinary shares, or equities, but there are a great many different types from which to choose.
Some unit trusts are very general and hold a large number of shares in different companies, spreading investments into overseas companies in some cases. Others are more specialised, giving the unit holders access to a particular geographic area or particular type of investment by industry sector.
It is important to decide what level of risk you want to take before choosing unit trusts. In any event though, unit trusts are a way of spreading risk across a larger number of ordinary shares than might otherwise be possible.