What is Unit Trust Dealing?

06 July 2009 - Xenia Rainey (Which Way To Pay)

    



What is Unit Trust Dealing?

It is widely encouraged to diversify your investment portfolio.  Therefore, besides your main share dealing activities, consider other areas.  A good stock broker or investment manager will be able to guide you through these and most should offer Unit Trust Dealing alongside their other investment tools.

Unit Trust Dealing is a collective investment fund that has a strict structure.  It is run by a manager and the trust members will have a collective ‘investment objective’ which must be stuck to.  The fund is then divided up into units, each of which varies in value and price.  You can buy units straight from a fund manager and hold them within you Personal Equity Plan or ISA. 

A fund manager will usually charge an annual management fee.  Unit trusts are open-ended, which means they are slightly higher in risk than regular investment funds.  Open-ended investments mean that the underlying value of an asset is always directly represented by the total number of units issued. 

Where is the profit?  It is made in the difference between the offer and bid prices of units.  This is known as the ‘bid-offer spread’ and is usually around 5 per cent.

When you sign up with a new stock broker, always go through what they offer alongside their main service.  Unit trust dealing may be offered alongside bond dealing or ISAs.  The broader a service the stock broker can offer, the better.

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