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Should you invest in a unit trust?

Unit trusts let you invest your money alongside other investors and offer the chance of making big profits, but are they worth the risk? Here is how they can work for you as easily as they could work against you.

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Pros and cons of investing in unit trusts

You should seek advice before making any decision on any stock market linked investment, but here are some unit trust related pros and cons to think about before taking that step:


  • Accepts smaller deposits compared to alternative investment products

  • Unit trusts are heavily regulated

  • Managed by a professional fund manager

  • Can invest in multiple securities with various risk factors


  • Offer price needs to exceed bid price before a profit can be made

  • Overwhelming choice of unit trusts

  • Charges can be expensive

  • Profit/loss depends on performance of a particular market if unit trust is not well-diversified

Remember: You need to understand what unit trusts are and how they work before you invest.

How do you monitor your unit trust?

You can monitor your investment by contacting your fund manager or financial advisor.

Alternatively, you should be able to log into your chosen fund management company's website to see the performance of your investment anytime you want.

The performance information will show the value of the buy and sell price of an individual unit in the unit trust. If the sell price is higher than your original buy price, then you are making a profit.

Can you use your ISA allowance with a unit trust?

Yes, you can invest in a unit trust using your ISA allowance, making your investment tax-free.

This means your investment amount is restricted to your ISA allowance each tax year - currently £20,000.

Invest by contacting the unit trust fund management company, a broker or independent financial advisor.

What are the risks of a unit trust?

As each unit trust invests in companies tied to the stock market you could end up losing money as a result of a downward turn.

Your fund manager will monitor the performance of your unit trust to try and avoid any blips in the stock market, and therefore keep your investment as profitable as possible.

Is a unit trust right for you?

To work out if a unit trust is the right type of investment for you, seek guidance or advice from a financial adviser before making any decisions.

How do you close a unit trust?

You can contact the fund manager directly and discuss the withdrawal of your investment.

Depending on the fund management company, you may have to pay an exit fee before you get your money back. This fee can cost you as much as 5% of your overall investment.

You will also lose money on your investment if the unit sell price is lower than when you made your investment. Make sure you arrange your withdrawal at a profitable time or risk losing money.