In Sri Lanka, the Unit Trusts are well operated schemes for small investors to participate in capital market instruments by pooling many peoples’ money and then invest in many securities using the professional expertise of the Fund Managers.
The shares listed in the Colombo Stock Exchange is one of such instruments that can give potentially higher return to the investors over time.
There are, of course, times saving money will be difficult particularly when studying or bringing up children, but it is important to look ahead. Saving little out of your income or investing lump sums when you can helps more. Holding savings for a long time also means they are more likely to grow in value as well.
What happens if we go through our life without saving or investing our money?
You might not have the comfortable retirement you wish for. People are living longer and can expect to rely less on the state for an income in retirement, which means you have to think ahead. It is surprising how much you need to save during your working life to keep you going for, say, 25 years of retirement. The earlier you can start to save, the better off you will be getting your financial affairs in good shape, with funds available to meet unforeseen costs, to pay education fees, to support in retirement, to reduce your mortgage, children’s wedding costs, can increase the sense of security and freedom.
The Unit Trusts in Sri Lanka, offers different types of funds with the objective of growth, income, and growth and income to choose a suitable scheme for your investment.
Following are the benefits that investors can expect in investing in unit trusts
1. Professional Management:
You get the services of the experienced and skilled professionals who are backed by dedicated investment research team which analyses the track record and prospects of companies and select suitable investments to achieve the objectives of the Unit Trust Fund.
2. Diversification:
Unit Trusts invest in a number of shares representing good companies across a broad cross-section of industries and sectors. This diversification reduces the risk because all shares seldom decline at the same time and in the same proportion. Investors in Unit Trusts can achieve diversification with small sum of money than on their own.
Risk can never be eliminated but it is possible to manage it by spreading one’s risk. This is referred as diversification. Do not put all eggs in one basket. It is important to remember that all investments have a degree of risk. Even choosing not to invest is risky. The key is to get the right balance. Most people need a mix of assets in order to achieve their goals. The mix required depends on their individual needs and circumstances.
What happens if my investments fall in value?
Investing in the stock market can be volatile, particularly when holding individual company shares. Stock markets move up and down on a daily basis and short term falls in the value of your shares are not unusual. If you are not prepared to see short term falls in the value of your investments in order to make long term gains, then investing in the stock market either directly or collectively, is not for you. The key thing to remember is that investing directly in stocks and shares should only be for experienced investors.
3. Convenient Administration:
Investing in a Unit Trust reduces paper work and helps to reduce many problems such as delayed payments and unnecessary follow up with brokers and companies. Unit Trusts save your time and make investments easy and convenient.
4. Return Potential:
Over a medium to long term Unit Trusts have the potential to provide a higher return as they invest in a diversified basket of securities.
5. Low Cost Base:
Unit Trusts are relatively less expensive way to invest compared to directly investing in the capital market because the benefits of scale in brokerage, custodial and other fees translate into lower cost for investors.
6. Liquidity:
In open ended Funds, investors can get the money back promptly at net asset value related prices from the Unit Trust itself. In listed close ended Funds, you can sell your units at prevailing market price.
7. Transparency:
You get regular information on the value of your investment in addition to details of the investments that your Unit Trust have made and Fund Manager’s investment strategy and performance.
8. Flexibility:
Through features such as regular investment plans, dividend reinvestment plans you can systematically invest according o your needs and convenience.
9. Choice of Schemes:
Unit Trusts offer various categories of funds to suit your varying investment needs over a lifetime. Often Manager’s provide switching facility from one fund to another with concessionary fees.
10. Well Regulated:
All Unit Trusts are licensed by the Securities and Exchange Commission of Sri Lanka (SEC) and they function within the provisions of strict regulations designed to protect you as the investors. The operations of Unit Trusts are regularly monitored by the SEC.
