Unit Trust: Forming a Portfolio
Investing in Unit Trusts : Forming a Portfolio
Studies show that as much as 90 percent or more of a portfolio's returns comes from asset allocation. Given below are the various types of unit trusts and the different types of assets which they invest in. These are presented in increasing levels of risk :
1. Stock or Equity Unit Trusts
These invests in stocks of companies. Some of these unit trusts have a more specific focus, like a specific country or sector. Some invests in 'categories' of stocks such as small caps, or blue chips, or emerging markets. Some are general, or 'global' and invests in a variety of sectors and categories.
Generally, the more specific the focus on the unit trust, the higher the risks that is involved.
2. Bond or Income Unit Trusts
These invests in bonds and other fixed income instruments. There is a great diversity of products in these categories but generally, they tend to be lower in volatility (risks) and returns. These are great investments for income preservation.
3. Balanced Unit Trusts
These unit trusts are a combination of the first 2. Their aim is to give investors a moderate level of risks and return.
4. Money Market Unit Trusts
These invests in short term money market instruments comprising IOUs of various kinds. These are considered 'safe' unit trusts, because there is very little volatility in the value of these instruments. However, their returns also tend to be low. The costs of acquiring them tend to be very low, which is a plus point.
If you have a
1. Short investment horizon (e.g. between 2 - 5 years), you should hold a greater proportion of less risky unit trusts.
2. Medium investment horizon (e.g. between 6 - 10 years), you can hold a mixture of higher risks unit trusts, and lower risks unit trusts.
3. Long term investment horizon (e.g. above 11 years), you can afford to have a greater proportion of higher risks unit trusts.
By varying your portfolio, and by shifting your unit trusts gradually towards lesser risks products as your investment horizon nears, you can optimize the levels of risks and returns to your investments!
As to specific recommendations of unit trusts, watch out for our recommendations (coming soon)!
http://www.fundsupermart.com/main/school/investing.svdo?PageID=11
Studies show that as much as 90 percent or more of a portfolio's returns comes from asset allocation. Given below are the various types of unit trusts and the different types of assets which they invest in. These are presented in increasing levels of risk :
1. Stock or Equity Unit Trusts
These invests in stocks of companies. Some of these unit trusts have a more specific focus, like a specific country or sector. Some invests in 'categories' of stocks such as small caps, or blue chips, or emerging markets. Some are general, or 'global' and invests in a variety of sectors and categories.
Generally, the more specific the focus on the unit trust, the higher the risks that is involved.
2. Bond or Income Unit Trusts
These invests in bonds and other fixed income instruments. There is a great diversity of products in these categories but generally, they tend to be lower in volatility (risks) and returns. These are great investments for income preservation.
3. Balanced Unit Trusts
These unit trusts are a combination of the first 2. Their aim is to give investors a moderate level of risks and return.
4. Money Market Unit Trusts
These invests in short term money market instruments comprising IOUs of various kinds. These are considered 'safe' unit trusts, because there is very little volatility in the value of these instruments. However, their returns also tend to be low. The costs of acquiring them tend to be very low, which is a plus point.
If you have a
1. Short investment horizon (e.g. between 2 - 5 years), you should hold a greater proportion of less risky unit trusts.
2. Medium investment horizon (e.g. between 6 - 10 years), you can hold a mixture of higher risks unit trusts, and lower risks unit trusts.
3. Long term investment horizon (e.g. above 11 years), you can afford to have a greater proportion of higher risks unit trusts.
By varying your portfolio, and by shifting your unit trusts gradually towards lesser risks products as your investment horizon nears, you can optimize the levels of risks and returns to your investments!
As to specific recommendations of unit trusts, watch out for our recommendations (coming soon)!
http://www.fundsupermart.com/main/school/investing.svdo?PageID=11
posted by Javier Lopez at 12:09 PM
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