Unit trusts, a fundamental aspect of collective investments, offer a unique approach to pooling resources for investment. This blog explores the workings of unit trusts, providing insights into this popular investment vehicle, which forms part of the content in the AFM NQF6 accredited course.
Unit trusts are collective investment schemes where investors pool money or other assets to gain a reward from their combined investments. In unit trusts, investors share both the risk and the benefit in proportion to their participatory interest, represented by shares or units.
A unit trust operates through the pooling of funds from many investors, managed by a Manager (or ManCo). The pooled money is then divided into identical units, with each unit holder entitled to a proportionate share of the fund's net income.
The structure of a unit trust comprises four key entities:
Investors can either use intermediaries or directly approach the Manager to invest in a particular fund. After cost deductions, the investor's funds are pooled with those of other investors.
Unit trusts are classified into various categories based on their investment strategies, such as equity funds, fixed-interest funds, and funds focused on resources and basic industries. Each type has specific rules and limitations, like restrictions on short selling and borrowing for investment purposes.
Understanding the dynamics of unit trusts is crucial for both novice and seasoned investors. This insight into unit trusts is just a part of the extensive knowledge offered in the AFM NQF6 accredited course. Accredited by BANK SETA, this course covers a wide array of financial topics across 13 modules. To discover more about the course content and to register for the next NQF6 course, visit AFM NQF6 Module Topics and AFM NQF6 Enrollment.