Unit Trusts and OEIC’s

Unit trusts and Open-Ended Investment Companies (OEICs) are professionally managed collective investment funds.

Managers pool money from many investors and buy shares, bonds, property or cash assets and other investments. This guide covers on-shore that means UK-based, OEICs and unit trusts.

When might a unit trust or OEIC be right for you?

If you don’t understand a financial product, get independent financial advice before you buy.

These may be for you if:

you want to invest in shares, or other assets but don’t have the time, interest or expertise to know what mix to go for
you understand you may get back less than you invested, and you’re comfortable with that
you can make a regular payment of as little as £25 a month, or you can invest a minimum lump sum of £500

How they work

You buy shares (in an OEIC) or units (in a unit trust).
The fund manager puts your money together with money from other investors and uses it to invest in the fund’s underlying assets.
Every fund invests in a different mix of investments. Some only buy shares in British companies, while others invest in bonds or in shares of foreign companies, or other types of investments.
You own a share of the overall unit trust or OEIC – if the value of the underlying assets in the fund rises, the value of your units or shares will rise. Similarly, if the value of the underlying assets of the fund falls, the value of your units or shares falls.
The overall fund size will grow and shrink as investors buy or sell.
Some funds give you the choice between ‘income units’ or ‘income shares’ that make regular payouts of any dividends or interest the fund earns, or ‘accumulation units’ or ‘accumulation shares’ which are automatically reinvested in the fund.

Risk and return

The value of your investments can go down as well as up and you may get back less than you invested.
Some assets are riskier than others. But higher risk also gives you the potential to earn higher returns. Before investing, make sure you understand what kind of assets the fund invests in and whether that’s a good fit for your investment goals, financial situation and attitude to risk.
Unit trusts and OEICs help you to spread your risk across lots of investments without having to spend a lot of money.

Access to your money

Most unit trusts and OEICs allow you to sell your shares or units at any time. Although some funds will only deal on a monthly, quarterly, or twice yearly basis. This might be the case if they invest in assets such as property, which can take a longer time to sell.
However, bear in mind that the length of time you should invest for depends on your financial goals and what your fund invests in. If it invests in shares, bonds or property, you should plan to invest for five years or more.
Money market funds may be suitable for shorter time frames in certain circumstances.

If you’d like to arrange a no-obligation meeting to discuss how we can help you please get in touch today, either by calling us on 01452 547783 or using our contact form.