Eneza Fund Bid: 102.320200 Ask: 106.031295  Hazina Fund Bid: 122.329900 Ask: 126.766736  Hisa Fund Bid: 109.595700 Ask: 113.570674 Iman Fund Bid: 97.783600 Ask: 98.771313  Hela Fund  Daily Annual Yield: 0.626% Effective Annual Yield: %



Daily Unit Trust Prices

Eight Principles of Successful Unit Trust Investing

What Is A Typical Unit Trust Fund Investor Profile?

A typical unit trust fund investor profile would be individuals who/corporations that:

• 

Have a similar investment objective as a fund.

• 

Are willing to take some form of risk through participation in the stock market and/or fixed income market.

• 

Want to hold investments that are liquid and easily redeemed.

• 

Want to enjoy a lower transaction cost while investing in the stock market.

• 

Want to have a well diversified investment portfolio which is professionally managed.

What Are The General Benefits Of Investing In A Unit Trust Fund?

·         Diversification

·         Professional fund management

·         Liquidity

How Do Unit Trusts Compare With Direct Investments In The Stock Market And Bank Deposits?

If a person has a very large amount of money to invest directly in individual stocks, they may be able to achieve a sufficient level of diversification. Losses in one or more of their stocks may substantially reduce the value of their portfolio. A unit trust fund, however, has a diversified portfolio and losses in some of the stocks will probably be offset by gains in other stocks. Nevertheless, a person with an undiversified portfolio may reap great returns if one or more of the stocks increase in value. Unit trust prices rise more gradually when some of its stocks rise in price because unit prices are based on the total value of the portfolio. Bank deposits are generally safe with low risk of capital erosion. The returns are however usually lower than investments carrying more risk and may be eroded by inflation more significantly. Unit trusts have historically yielded better returns than bank deposits but such investments carry more risks of loss.

Performance Indicators/Benchmark

Investors measure the performance of their investments in unit trusts by various means, and very often take into account pure price changes (rise or fall in unit prices) or the amount of distributions received from a fund. The appropriate method of calculating performance is by including both. This performance measure is called total returns as it includes all sources of income and gains (or losses). Investors need not compute these calculations themselves as total returns figures are published weekly in leading financial magazines and local daily newspapers, or the websites of the financial institutions concerned. For a better picture of a fund's performance, you may look at both short (three to six months) and longer-term (three and five years) performance figures. Performance benchmarks are used to measure the relative performance of equity funds.

PRINCIPLE 2:Know Yourself

It is conventional wisdom that you should be willing to accept more risk if you are looking for higher return, or be happy with less return at lower risk. There is however some flexibility in planning to meet your needs and preferences. Answers to the following questions can serve as a guide to choosing the most appropriate funds for investment:

-       What stage of the life cycle am I at now?

-       What are my investment goals?

-       What kind of returns am I looking for?

-       How much risk am I comfortable with?

 

PRINCIPLE 3:Investment Strategy

Most unit trusts work best when taken as an investment vehicle for the medium to long term. Funds selected for investments should be appropriate for your investment horizon, financial goals and risk profile. Attention should also be given to achieving a good degree of diversification. Circumstances may change and you should review your strategy regularly.

 

PRINCIPLE 4:Start Early

The power of compounded returns (returns generating more returns) makes it wise to start saving and investing as early as possible. There may still be the risk of decline in the capital value of investment, but a longer investment horizon will certainly give more room for riding out the bad times or the occasional setbacks.

 

PRINCIPLE 5: Invest Regularly

Regular investments have benefited in many cases. Instead of trying to time the market, which even the experts have difficulty achieving, invest a fixed amount regularly especially when such surplus has been budgeted from a regular stream of income. This practice of investing regularly has a tendency to average out wild fluctuations in prices to your benefit.

 

PRINCIPLE 6:Invest For the Medium to Long Term

Historically, unit trusts have provided better returns in the longer term, but have entailed greater short-term risks than other savings vehicles. Your planning and expectations must accordingly be attuned to a longer investment horizon. Unit trusts offer potentially higher returns over the longer term although they do present wider fluctuations in the short run.

 

PRINCIPLE 7:Diversify Your Portfolio

Diversification or spreading your investments among the various fund options can help ride out interim fluctuations. It works because the different asset classes have different fundamental characteristics and can move in different directions. For example, when the economy faces a downturn and interest rates are falling, bonds will usually outperform equities, whereas when the economy is booming, equities will generally outperform bonds. In the long run, diversification increases returns while lowering risks, which is why it is the single most important part of any investment strategy.

 

PRINCIPLE 8:Make Adjustments over Time

Review your investments regularly to ensure that they still reflect your financial goals and personal circumstances. For example, at one stage of your life you might be seeking longer-term investment that focuses on building savings and accumulating capital. Later on, you might prefer a lower-risk investment that places more emphasis on income. Whatever the reason, making adjustments over time is essential and needs to be incorporated into your investment strategy. Through regular monitoring you can ensure that your investment portfolio continues to match your financial objectives.

Associates

Chase Bank Ltd
www.chasebank.co.ke

Genghis Capital Ltd
www.genghis-capital.com

Winton Investment Services Ltd
www.winton-investments.com