| For those who want to get involved in the stock | | | | Each Unit Trust has its own investment objective |
| market, but don`t have sufficient funds to make | | | | and the fund manager has to invest to achieve |
| it worthwhile purchasing just one company`s | | | | this objective. The fund manager will invest the |
| stock, mutual funds, or unit trusts, can be a good | | | | money on behalf of the unit holders (or |
| option. Many companies allow the purchasing of | | | | shareholders). The value of your investment will |
| these on a monthly basis, thus `drip feeding` the | | | | vary according to the total value of the fund. |
| purchases over a period of time. | | | | The trust manager makes a profit in the |
| A mutual fund is a professionally managed type | | | | difference between the purchase price of the unit |
| of collective investment scheme that pools | | | | or offer price and the sale value of units or the |
| money from many investors and invests it on | | | | bid price. This difference is known as the |
| their behalf. The mutual fund will have a fund | | | | bid–offer spread. The bid–offer spread |
| manager that trades the pooled money on a | | | | varies from company to company, and even |
| regular basis. The term mutual funds is used in | | | | from fund to fund within the same company. |
| the United States and Canada. In the UK, Ireland, | | | | Market conditions will often dictate the size of the |
| Australia and some other countries they are | | | | spread, the lower the spread the better for the |
| known as unit trusts. For our purposes mutual | | | | investor. Some fees are declared as a percentage |
| funds and unit trusts have been to mean virtually | | | | of your investment, others are built into the price. |
| the same thing, but note there are some | | | | Mutual funds, and unit trusts, can invest in many |
| differences, which should be checked at the time | | | | kinds of securities. The most common are cash |
| of any purchase. | | | | instruments, stock, gilts, and bonds, but there are |
| Trusts and OEICs provide a mechanism of | | | | hundreds of sub-categories. Common areas to |
| investing in a broad selection of shares, thus | | | | invest in are stocks in geographical areas, such as |
| reducing the risks of investing in individual shares. | | | | North America, Europe, Asia and so on. Or, they |
| There are thousands of Unit Trusts and hundreds | | | | can invest in Emerging Markets, New Companies, |
| of OEICs to choose from, so it is important to | | | | companies with green credentials, small |
| select the right fund to meet your needs. | | | | companies, or the bigger so-called Blue Chip |
| Unit trusts are open-ended; the fund is equitably | | | | companies etc. |
| divided into units which vary in price in direct | | | | Bond funds can vary according to risk, for |
| proportion to the variation in value of the fund's | | | | example high-yield junk bonds or |
| net asset value. Each time money is invested new | | | | investment-grade corporate bonds, type of |
| units are created to match the prevailing unit | | | | issuers such as government agencies, or |
| buying price; each time units are redeemed the | | | | corporations, or even the maturity of the bonds |
| assets sold match the prevailing unit selling price. | | | | as in short or long term. |