Unit Trusts

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Unit Trusts

These are professionally managed funds investing in shares and/or other stock market investments. They can invest in other assets too, such as property and futures and options (the last two let you speculate on which way the future prices of shares and other assets will move without actually holding the shares or assets themselves), though only a few do. The fund is divided up into units, and you invest by buying these units. The value of your holding depends on how the price of those units moves. Often, the unit trust management company operates a range of different trusts, for example:

• UK all companies, investing in shares of UK companies and aiming to produce a mixture of income and growth
• UK growth, again investing in UK companies, but specialising in shares expected to produce capital gains
• UK equity income, concentrating on shares with high dividend yields; the income can be reinvested rather than paid out
• 'index' or 'tracker' funds, which mimic the movement of a particular stock market index, such as the FTSE-100, and which often have lower annual management fees because the under-lying investments are less actively traded gilt and fixed interest, investing in gilts, corporate bonds, preference shares and similar investments
• convertibles, investing in convertible corporate bonds
• balanced, investing in a mixture of shares and fixed interest
• international funds, investing in shares etc. from a wide range of stock markets around the world
• smaller companies
• particular countries, for example European countries or Japan
• fund of funds, investing in other unit trusts.

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