Why every new investor needs to consider unit trusts

Why every new investor needs to consider unit trusts
Carla de Waal, Head of Multi-Management and Manager Selection

As a new or early-stage investor, it’s important to understand the basics of investing and the potential risks and rewards involved. First and foremost, have a clear set of goals and understand how much risk you can tolerate in your investment journey.


You’ll also come across several investment options along the way, and one of the most common ones will be unit trusts (also known as collective investment schemes). A unit trust is a type of investment vehicle that pools money from multiple investors to purchase a diversified portfolio of assets, such as stocks, bonds, and listed real estate companies.  Collective investment schemes and the providers thereof are very well regulated in South Africa, further safeguarding the investments of investors.

Unit trusts are advantageous savings and investment vehicles for several reasons:

  • Professional management: Unit trusts are managed by professional fund managers, who have the expertise and resources to make informed investment decisions on behalf of the investors. This can be beneficial for those who lack the time or expertise to manage their own investments.
  • Diversification: Diversification is one of the core principles of prudent investing, and by investing in a unit trust, investors could diversify their portfolios without purchasing a significant number of assets individually.
  • Access to a wide range of investments: Unit trusts offer affordable access to a wide range of investments, including those that may be difficult or expensive for individual investors to access, such as foreign stocks or property.
  • Cost-effective: Unit trusts can be cost-effective because the fund manager is making investment decisions for a large number of investors, which can help to lower transaction costs.
  • Convenience: Investing in a unit trust is relatively simple and convenient, making it an accessible investment option for a wide range of investors.

FNB recently launched a Tax-Free Unit Trust offering on the FNB App to provide customers with more options for maximising their tax-free benefits. Customers have the option to choose from various unit trusts with contributions starting at R300 per month or R5000 once-off. The Tax-Free Unit Trust complements other tax-free solutions such as a Tax-Free Cash Deposit and Tax-Free Shares account, also available via the FNB App.

It’s important to remember that unit trusts, like any other investment, come with associated risks, hence it’s essential to understand the objective, structure and expected performance of a unit trust before investing. Finally, as an early-stage investor, it’s important to stay disciplined and stick to your investment strategy and goals, even during times of market volatility. It can be tempting to make impulsive decisions based on short-term market movements but sticking to a well-thought-out strategy is more likely to lead to long-term success.