Unit Trust is also known as mutual fund, which is the second most popular investment channel after stock market.The reason to name as mutual fund as it is created with mutual trust between investor and unit trust manager.

The following image shows all the parties that involve in unit trust investment and the process flow of it.

Unitholder or so called investor, will invest their money into a selected fund.The selected fund will have guideline or deed that had been established when the fund was set up.The guidelines or deed will specified in detail including the objective of the fund, the strategy of investment, the target investment and etc. It is possible that the fund will be invest into couple types of investment like stock market, bond and money market.The percentage of different type of investment will be specified in the guideline or deed too.

The fund is going to manage by Unit trust manager, who is the appointed individual by the unit trust company. Unit trust manager are those individual with great experience in stock market, bond , money market and other type of investment channel. With their experience, they will be able to mitigate the risk of investment to lower risk.Hence, unit trust will have lower risk compared to stock market. The main strategy to mitigate investment risk is diversification. They will invest diversified portfolio to mitigate the risk.

Trustee is the custodian for the fund. It will responsible to ensure the fund will be invested as per guideline and deed that had been established when the fund was set up.

The returns of the investment will be distributed based on two methods. One is distribution or dividends. Unit trust manager will declare dividend for the fund to return the earning of the investment to the investor or unit holder. Investor can decide to reinvest the dividend or cash out the dividend. Another type of returns is capital gains. Every fund will have a unit price or Net Asset Value(NAV). If you invest in a fund with unit price $0.30 and you cash out your investment when the price hit $0.40. It means you gain $0.10 per unit for capital return.

To sumarize, Unit holder will invest their money in unit trust fund. Unit Trust manager will responsible to make investment decision on diversified portfolio based on their research and experience.Trustee will ensure the fund manager invest  the fund based on the guideline and deed. When the fund make money, the return will be distributed thru distribution or capital return.

Please contact unit trust author if you have any questions or interested to perform any unit trust investment.

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