Unit Trusts & OEICs

Investors can pool their funds in Unit Trusts and OEICs (Open Ended Investment Companies). Pooled funds buy a range of shares, gilts, bonds or cash deposits.

Both Unit Trusts and OEICs Are Open Ended Funds.

Therefore, this means that the size of each fund can vary according to supply and demand.

Unit Trusts and OEICs provide a mechanism of investing in a broad selection of shares. Thus reducing the risks of investing in individual shares.

Typically, a Unit Trust or OEIC is worth anything from £5m to £300m. There are thousands of Unit Trusts and hundreds of OEICs to choose from. Therefore, it is important to select the right fund to meet your needs.

Investing in Unit Trusts & OEICs

Each Unit Trust and OEIC has its own investment objective.

When you invest in a Unit Trust you buy a unit.
This means a portion of the total fund.

Whereas, OEICs issue shares.

The fund manager must invest to achieve this objective.

The money invested by the fund manager is on behalf of the unit holders or shareholders. The value of your investment will vary according to the total value of the fund. This is determined by the investments the fund manager makes with the fund’s money.

To cover the costs of running a fund you will usually have to pay an initial charge. This is when units or shares are purchased. Also, you will pay an annual fee for ongoing costs such as administration.

Some fees are declared as a percentage of your investment, others are built into the price.

You can invest into a Unit Trust or OEIC through an Individual Savings Account. Usually, there are no additional charges for having an Individual Savings Account. In addition, you have the advantage of the investment being tax-free.