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The Unit Trust Option

One of the main questions that people have been asking Piggy is whether one must save or pay off debts first? The fact is that there is no reason why, with some good financial planning, you cannot do both! While debt or leverage provides certain advantages, it must always be kept at a “manageable minimum”. If you put off taking on big debts for a few years and invest aggressively initially, you can often accumulate a big enough lump sum to put as a down payment which softens the blow of the debt.  In addition, if one does not have excessive debt, the impact of rising interest rates on their pocket will be negligible. In fact, if you can accumulate cash reserves, a higher rate can benefit you greatly. Individuals and households should be able to create wealth and protect the wealth they have created.  Wealth can only be created through earnings, savings and investments.  It is also worth highlighting that there are risks along the way which can prevent individuals or households from earning an income, therefore being unable to save and make investments.

So where can one start from? Piggy has been encouraging individuals and households to start buying shares using the C-Trade platform.  Many people might have heard that equities or shares are the best in the long term but may not be sure how to get into the stock market.   Another easier option would be through unit trusts. These provide an effective and simple way of starting to save using the stock market.  Some unit trusts track the main indices on the stock market at a low cost and this gives investors access to a great spread of companies

In some cases, people may not have enough money to buy shares directly from the stock exchange but would like to have their money invested in the best performing shares on the market.  They will then pool their money together with those of other investors with similar needs and wants as far as funds are concerned and this pool of money will then be used to purchase these shares. This is referred to as a collective investment. The word “unit” refers to the portion or part of the collective investment that is owned by the investor. The “trust” is the financial instrument that is created in order to manage the investment. The trust enables financial experts to invest the money on behalf of the pool of investors. Pooling is the basic concept behind collective investments. The money of thousands of individual investors, who share a common investment objective, is pooled together to form a portfolio. The value of the unit depends on the rise and fall of the market value of the assets in the portfolio. The purchase of units in a unit trust and the number of units the investor receives depends on the amount invested and the current unit price. An asset manager may choose to use the pool of funds from unit trust holders to buy a diversified portfolio of investments including shares on the Zimbabwe Stock Exchange (ZSE), bonds, and other financial instruments. There are several institutions in Zimbabwe that offer unit trust products. Piggy should be able to point you to some of the major ones.

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