ADVANTAGES AND DISADVANTAGES OF UNIT TRUSTS

Advantages of unit trust

Managed by a fund manager who buys shares on the stock exchange/JSE.
Easy to cash in when an investor needs money.
A small amount can be invested per month.
Generally beats inflation on the medium/long term.
Safe investments, as it is managed according to rules and regulations.
The investor has a variety to choose from/a wider range of shares from lower to higher degrees of risk.
Easy to invest in, as investors simply complete a few relevant forms or invest online.
Fluctuations in unit trust rates of return are often not so severe because of diversity of the investment fund.
Offer competitive returns in the form of capital growth and dividend distribution.
Fund managers are knowledgeable/experts/reliable/trustworthy as they are required to be accredited to sell unit trusts.

Share price may fluctuate
Unit Trusts are not allowed to borrow, therefore reducing potential returns.
Not good for people who want to invest for a short period
Not good for people who want to avoid risks at all costs.
If blue chip companies do not continue on their growth path, the growth of unit trusts will also be affected and will not render the expected returns.
Bid/Ask prices exist with the price that you can buy a unit for usually higher than the price you can sell it for making investment less liquid.