Many people want to invest in the Stock Market but do not have the necessary information to select the right individual shares.
Collective investments, such as unit trusts, were established some years ago, to allow this type of investor to buy shares through a manager who knows what stocks to pick. The average unit trust has about 80 stocks in it, so you spread your investment between those 80 shares and thus reduce your risk. The value of the units themselves which contain the shares, can fall as well as rise, but in the long term investments in equities via unit trusts tend to perform better than other asset classes.
Over the last few years, most unit trust providers have converted their funds
into Open Ended Investment Companies (OEICs), which are similar in structure
to Unit Trusts, but with a simplified 'single pricing' structure. This makes
for greater 'transparancy' in assessing costs and performance.
Investment Trusts are a similar media to Unit Trusts, but Investment Trusts are limited companies which are allowed to borrow money and so can, therefore, gear the investment by buying extra shares when the market is right and pay back the bank once they have made a profit. These are a little more challenging for investors and expert advice is needed.
How you buy unit trusts, OEICs or investment trusts is also an important decision. We have already mentioned you can buy them through ISAs and Personal Equity Plans. You can also buy them within certain pension portfolios and investment bonds. Otherwise you can buy them very much like stocks and shares and hold them individually. For further information, please do not hesitate to
contact us
.
