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Unit Trusts are special trusts that enable the investors to pool their resources and thereby spread their risks, have professional management etc. Unit Trusts are now one of the most popular ways for the average investor to enter the market.
Unit Trusts were begun as self help groups, but they are now set up and run by the financial companies, who create new ones as markets open up.
There are thousands of Unit Trusts to choose from in all sectors.
Expect to pay a bid offer spread of 5-7%, and an annual management charge will normally be 1-2%.
They can be used in ISAs and PEPs.
The managers can buy and sell within the trust without paying tax. Tax liabilities arise only on dividends and any unit sales by the holder. Dividends are under Income Tax, gains/losses on sales under Capital Gains Tax.