For many years, property has been an excellent investment. And, rather than investing directly in bricks and mortar it is possible to benefit from good returns by considering a unit trust property investment.
Unit trusts and property funds are ‘shared investments’ where you pool your money with thousands of other people. Your cash buys units in a fund run by a property unit trust manager.
The value of your investment then rises and falls as the value of the underlying investment fluctuates.
Whereas many unit trusts invest in shares of companies in the UK and overseas, a unit trust property investment is mainly invested in the ‘property’ asset class. This is generally commercial property although it can also include residential property.
Factors to consider when you compare property unit trusts
There are several factors that you should consider when you undertake a property unit trust comparison:
- Where your money will be invested
- The previous performance of the unit trusts and property funds
- The charges and fees
Firstly, you should research where your money will be invested.
When you compare property unit trusts you will find differences in where the fund invests. Does the unit trust invest in property just in the UK or does it invest overseas as well? What sort of property investments do the fund managers prefer?
For example, a fund that invests in commercial property in emerging markets such as China and India might offer the potential for higher returns but it is also likely to be a much riskier investment.
You should also take into account the previous performance of a fund. While this is no guide to how it will perform in the future you can see how well it has done when compared to similar unit trusts and property funds.
You will also need to take the various fees and charges into account when you undertake a property unit trust comparison.
When you invest in a unit trust you will generally find that you pay both an ‘initial charge’ and an ‘annual fee’. The initial charge can be up to around 6 per cent of your initial investment whereas an annual fee can be anywhere from 0.25 to 2 percent.
Generally speaking, while you may pay higher fees for a top property unit trust manager, the property unit trusts with lower charges are often preferable. This is because less of your investment is deducted in charges meaning your returns are likely to be better.
