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A Fin24 user wants to choose between an equity unit trust and investing directly on the JSE. He wrote:
I currently have a retirement annuity (RA) with Allan Gray and am looking to invest either in an equity unit trust or invest directly with the JSE.
I have extra monies that are available to me, so would like to make the right decisions. Any advice?
Jeanette Marais, director of distribution and client service at Allan Gray, responded:
There is no one-size-fits-all answer to your question.
It depends on your personal investment goals, risk profile, time horizon, current portfolio composition and the amount of money you have to invest. However, we can still compare some of the options, highlighting their benefits and shortfalls.
If you choose to buy units in an equity unit trust, a professional asset manager will invest your money in a selection of shares which he or she thinks will perform well (and are in line with the fund’s objectives).
Minimum investment amounts vary among fund managers. However, your money will be pooled with other investors’ money, which will allow you to gain exposure to a wider range of shares with less money than if you invested in shares directly. Unit trusts can be a cost-effective option.
But it is important to look for one that offers value for money.
Fee structures differ among managers, but generally all fees and expenses (including the investment management fee and the costs of operating the unit trust) are accounted for in the price of the units.
When choosing a unit trust you should look at its objectives, long-term performance and fee structure to understand what you can expect going forward.
To invest on your own, you will need passion, time and skill to select shares that you believe will do well.
You will have to go through a licensed broker, who buys and sells the shares on the JSE for you.
If you invest this way, you will not have to pay investment management fees, but you will also not benefit from the manager’s expertise.
You will still be charged other fees though, such as brokerage fees, trading costs and other levies.
You may also consider topping up your current RA. In addition to tax advantages, investing in an RA protects your investment, as you cannot usually access your money before you retire (at age 55) and you can still choose between different unit trusts.
A good investment plan needs to suit your personal circumstances. An independent financial adviser can help you to formalise a plan and choose products and funds that are appropriate for you.
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