A unit trust is managed by a professional fund manager who is responsible for making the investment choices of the trust in line with the trust objectives which are set out in a trust deed. Investment will be made in typically in 40 to 100 different types of security including equities, gilts, bonds and property and the manager may be able to invest in different geographical regions.
When you buy into a unit trust the price you pay will be a reflection of the underlying value of the investments. As an open ended investment new money which comes into the unit trust can be used by the fund manager for new investment opportunities. Many unit trust providers also provide ethical investment or green fund options which are becoming increasingly popular.
Investing in a unit trust provides a way of investing in the stock market in a diversified portfolio of securities and thereby reduces the investment risk.