Updated: February 17, 2020

How Can You Compare Unit Trusts?

Comparing unit trusts is essential to make your investments go further. Find out how to do it quickly and easily in our guide.

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: February 17, 2020

If you’re considering investing into a unit trust you probably want to understand how to compare the options available to you. This guide explains the ways you can compare unit trusts and how to know what to look out for as you decide where to put your savings for the best returns.

How to compare unit trusts

To compare unit trusts, it’s first necessary to decide what kind of fund you want to invest your money in. There are a huge variety of funds you can invest in and without understanding the core investment strategy, it would be impossible to begin a fair comparison between any two unit trust funds.

Every unit trust is managed by a fund manager, and each fund manager has a different investment approach. You can, for example, find many unit trusts which invest in UK company shares, but not all UK fund managers will make the same investment decisions with the pool of money they are managing.

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What to look for when making unit trust comparisons

Understanding that comparing unit trust investments isn’t as straightforward as choosing between which savings account to use, there are four core things you can look for when trying to decide which unit trust is right for you:

  • What are the costs and fees?
    Compare the charges which will be made by each of the unit trusts you are considering. Unit trust investments always come with costs to cover the management expenses of running the fund. Check if there are upfront charges for investing and how much you will be charged for the annual management fee.
    Fees are usually taken directly from the fund and will be subtracted from the money you invest. This is one of the reasons it’s so important to ensure you invest in a well-managed, profitable fund as charges being taken from a fund which is under-performing will erode your capital.
  • Where are the funds invested?
    Funds are usually segregated by geography or market sector. If you’re comparing funds, make sure you start by understanding where a fund manager is primarily placing their investments.
    Are they investing in the UK or Europe? North America or Asia? Or are funds invested with a focus on sector? For example, is it a property fund or a technology fund? If you’re a sustainability-conscious investor, it might be important to you that the funds are invested in ESG (Environmental, Social and Governance) sources.
    Once you have a clear understanding of where the money in the fund is being invested, it’s possible to take two or more unit trusts with the same focus and draw comparisons between past performance, fund manager experience and, if you’re willing to do a lot of reading, know the thoughts of the fund manager for the upcoming financial year or quarter.
  • How are the funds invested?
    While it’s possible to invest in unit trusts which invest in stocks and shares around the world, or in different market segments, you can also invest in funds which follow a market index, like the FTSE 100.
    If the index rises, so too does the value of your investment. If, on the other hand, the index falls, the value of your investment will fall by the same degree.
    These types of tracker funds are generally lower cost than the kind of unit trust described above, yet they still allow you to diversify your investment by splitting your money between countries and assets. You could, for example, track a combination of the FTSE 100 and the Dow Jones simultaneously.
  • How has the fund performed in the past?
    While past fund performance is not a guarantee of how the fund will continue to perform in the future, it’s a useful barometer to judge the merits of a fund manager. Consistent, year-on-year growth is a good indication that the fund manager is able to make reliable investment decisions.
    No fund manager can do a good job of growing an investment fund without taking some risks. So when a fund continually outstrips the market in growth, it’s strong proof of the fund manager’s ability to judge trends, predict market movements and make smart, proactive decisions in a timely manner.

Without prior investment experience, this is a lot of information to take on board and understand. For help in understanding what kind of investment would be right for your circumstances, speak to one of the investment experts we work with.

All the experts we work with are independent financial advisors, fully qualified to provide advice and are authorised and regulated by the Financial Conduct Authority.

Make an enquiry for a free, no-obligation chat and we’ll match you with an expert who will help you devise an investment strategy which works for you, your budget and your appetite for risk.

They will use their broad knowledge of investment funds and fund managers to ensure your money is in safe hands, reviewing your investments on an annual basis to safeguard any changes in investments you may hold.

Can I trust websites to make comparisons for me?

Some of the big investment houses let customers compare a wide range of investment funds provided by their own organisation, as well as those from other investment providers. While these systems are easy to find, they are less easy to use since you need some knowledge about which funds you wish to compare; knowledge you may not yet have.

As well as comparisons available from big investment providers, you can also find detailed information on sites such as Morningstar, which specialise in giving all kinds of investors information to help them make the right decisions.

Much of the investment language used on sites like Morningstar and competitor services can be confusing, if you aren’t yet a seasoned investor with all the lingo falling naturally from your tongue.

You also need to make a decision about whether you want to put your investment into an ISA to get tax efficiencies, and this is something a financial advisor can advise you about.

If you want to start making wise investments without falling at the first hurdle, because there’s so much new information to take on board, speak to one of the experts we work with.

Speak to an expert

Save yourself a heap of time and headaches and start reaping the rewards of making wise investments by talking to one of the expert advisors we work with.

All the experts we work with are independent financial advisors authorised and regulated by the Financial Conduct Authority.

Call 0808 189 0463 or make an enquiry and we’ll match you with an investment expert who will be happy to answer your questions and explain how unit trusts compare.

They will be able to recommend investments you may wish to consider based on your all your circumstances, your financial goals and your appetite for risk.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in unit trusts. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

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