We all have different goals in life and there are different ways to achieve these goals. A unit trust provides easy and affordable ways to plan one’s investments. The key question then becomes what are unit trusts and how do they operate. In very simple terms unit trusts are pooled funds with a very specific investment mandate driven by the overall objectives of the fund. They are established as trusts and are regulated by the Capital Markets Authority.

Unit trusts invest largely in securities that are both regulated like quoted stocks, government bonds and bank deposits and unregulated products like some commercial papers and bonds.

Below are some of the key advantages of investing in unit trust funds:

1. Help create some savings discipline: One can create standing orders that go directly to the unit trust fund and so do not need to think about the investments in future;

2. Access to a diversified portfolio: Given many people are pooling in the funds, they can be invested in different asset classes helping with diversification that reduces the risk;

3. Enhanced returns: Compared to savings rates unit trusts have registered above-average returns averaging about 10 per cent over the one year compared to the three per cent that you get from the savings account;

4. Access to affordable fund management ser v I c e s a n d e n h a n c e d f i n a n c i a l management training: Most fund managers, as a value addition strategy, give free training to their clients on how to manage their finances. One also gets to have their funds managed by professionals who would be costly if one was to seek their services directly;

5. Affordability: For most funds, the minimum amounts have become low making it easy for most people to interact with this product and invest in them;

6. High Liquidity: One has easy access to their cash without losing value. We have seen many fund managers adopt digitisation and integrated the funds with mobile money making it easy for one to access their cash wherever they are.

When deciding which type of unit trust fund to invest in below are the key considerations:

1. Your Risk appetite: In investment most of the time risk is inevitable but it is good to understand oneself in terms of how much risk they can withstand. Generally, the risk is the probability that the investment you have does not yield the returns that you expected. If you do not want to take much risk then consider lower risk unit trusts like money market and fixed-income funds;

2. Return projections: It is good to go for the investments that offers the very best returns at the measured level of risk. Like Benjamin Graham said the aim of shrewd investment should be to find opportunities which offer larger returns than the average combined with the adequate safety. The returns projections helps us determine which particular fund to invest in and which provider to go with;

3. The minimum investments amount: At times some funds we would wish to invest in ask for huge minimum investments which might not be within our reach but lately we have seen a lot of change towards reduction of the initial investments amounts and with small amounts to start one can start the journey;

4. The ease of accessing your cash: Generally, unit trust are very liquid and one can easily access their cash within two to three days. Lately, with the adoption of technology, the liquidity cycle has even reduced and their instant withdrawals for amounts that can be withdrawn via the mobile application

Given that all the legal structures are generally the same when deciding which unit trust to go with then the key considerations should be:

1. The historical return the fund has generated one can be able to get this kind of data from the regulator’s website and also they are published in the national dailies.

2. The reputation of the sponsor and the other service providers. Most of the players in the market are regulated and they include the trustees, the fund managers, custodians. One needs to ensure that they make themselves comfortable with these people.

3. Adoption of technology by the particular fund: Investments and access to one’s investment should be hustle free and it is for this reason that one should look at how technologically-driven are the funds one is investing in are. The unit trusts are the easiest and safest way for any investor to start engaging with the capital markets before they can access the other direct investments in the market. The main reason is starting small learning the process as you wait to jump all in.

The writer is a personal finance expert [email protected].