your guide to unit trusts


A unit trust is the pooled money of many investors that is invested in the financial markets through a single collective investment scheme. Unit trusts invest in different markets and market sectors, while some invest across markets.

Access to trading in unit trusts has long been a technically challenging and costly exercise, diluting the returns on investments and discouraging individual investors. was launched with the express aim to give individuals easy and affordable access to this important investment vehicle.


The solution allows you, via their online portal facility, to take ownership of your unit trust investment portfolio at a fraction of the prevailing industry charges. Choice, flexibility and transparent access to a range of underlying unit trust funds on one administrative platform, consolidated reporting and the ability to switch between underlying funds, and to construct portfolios and re-balance easily and cost-effectively, are compelling reasons for investors to use to invest in unit trusts.


What are the benefits to investing in unit trusts?

1. Safeguard

A unit trust fund has an investment mandate, which is a legal contract that sets out the fund’s investment aims. The mandate will give you an idea of whether the fund is a low-, medium- or high-risk investment. Funds appoint trustees (usually a bank or financial institution not affiliated to the unit trust company or fund manager) to look after the cash, shares or bonds that your fund owns.

The appointment of trustees means that even if the unit trust management company goes under, your money will still be safe because it is held in a trust. In terms of the Collective Investment Schemes Control Act (Cisca), unit trust funds are not allowed to invest more than 10% in the shares of unlisted companies.

2. Recourse

A unit trust fund is part of a well regulated industry and you have recourse if anyone tries to defraud you. Unit trusts are regulated by Cisca, which replaced the Unit Trust Control Act in 2002.

The Financial Services Board (FSB) regulates the unit trust industry and all unit trusts that are marketed in South Africa must be registered with the FSB.

3. Professional expertise

When you invest in a unit trust, you have access to the expertise and services of investment professionals known as asset managers or fund managers, who specialise in managing investments. They use the pool of money to buy underlying investments, such as shares, bonds and cash or a combination of these assets - on either the local or foreign market, depending on the type of fund in which you invest.

Fund managers are more likely to make sound investment decisions and stock picks than you are, because they have the expertise and experience.


4. Track performance


You can track the performance of your unit trust fund on a daily basis on investment websites or via the press. Personal Finance publishes a unit trust performance table every weekend in the Saturday newspaper.

The Personal Finance unit trust performance table publishes the return of your investment over one-, three- and five-year periods. It is a good idea to look at the performance history of a unit trust fund over the longer periods before you choose to invest in that fund.

To calculate the value of your investment, simply multiply the number of units you own by the unit price, or NAV.


5. Diversification


Pooling your money with that of other investors who have similar investment goals allows you to own a diverse range of investments at a low cost.

Many individual investors do not have enough money to invest directly in the range of underlying assets that unit trusts offer you at a low cost.

Unit trusts also give you access to investments, such as bonds, that have high minimum investment amounts that may be beyond your reach.

The advantage of being diversified across a broader range of shares, bonds or other securities is that your investment risk is reduced. For example, if one share or market sector does not perform well, this may be mitigated by the strong performance of other shares or sectors in which the fund is invested.


6. Easy access to your money


There are no minimum investment periods when you invest in a unit trust, and you can cash in your unit trust investment at short notice.

You will be paid the value of the units on the day your request to disinvest is processed. This is usually the same day if you submit your request timeously, or on the next working day. The money is usually paid into your bank account within 24 hours of the units being sold.

Depending on the type of funds in which you invest, it is considered prudent to leave your money invested for about three to five years in order to recoup the investment costs and to ensure an appropriate return.


7. Interest income and tax


You can earn interest and/or dividends when you invest in a unit trust, depending on the type of fund in which you invest. Individual funds decide whether to declare these earnings monthly, quarterly or six-monthly.

You can choose to have the interest or dividends paid out to you or reinvested in the unit trust, which will increase the number of units you own.

You may be taxed on the interest you earn from your investment and you may also pay capital gains tax (CGT) on the gains you make when you sell your unit trust investment.

The tax you pay will depend on the applicable exemptions and on your tax bracket.

The CGT exemption for the 2009/10 tax year is R17 500. The exemption on interest income for the 2009/10 tax year is

R21 000 if you are under 65 years old and R30 000 if you are aged 65 and older.


Why Investonline?


1. Choice


There are more registered unit trust funds in South Africa (over 900) than there are shares currently listed on the J.S.E. (Johannesburg Stock Exchange) which makes it critical to have professional assistance in selecting and structuring your investment portfolio of unit trusts. has structured risk-profiled and diversified unit trust investment portfolios from the top-performing unit trust funds in South Africa to assist our online clients in selecting the better performing funds at an exceptionally affordable cost.


2. Online convenience


More and more clients are happy to transact online for convenience and affordability in the transaction process. As long as you have internet access, you have the convenience of monitoring your portfolio. In short, you are able to manage your unit trust portfolio online, at any time, at a very competitive fee.


3. Substantial cost savings is one of the first companies in South Africa to pass on wholesale prices when you buy unit trusts. This results in substantial savings relative to the usual 3.42% - 5.70% upfront fee charged by most investment providers. has zero upfront fees.

The following factors enable to reduce fees and pass savings on to the client:

By clients transacting online, is able to remove any upfront fees. Effectively you are now in charge of your own investment portfolio via our website.

The investment management portfolio fee rebates are passed directly back to you which results in an average annual 0.40% p.a. savings to you on your total investment amount.

The inherent efficiencies of the internet and the very competitive fee structure of our selected investment platform (managed by Allan Gray) allows for attractive savings on the administrative costs typically incurred in the unit trust investment industry.


4. Independence


The portfolios selected are well diversified and have been independently selected by on a best-advice basis and on proven, historical track-record performance where fund managers have demonstrated their ability to manage downside equity market risk over time.


5. Safe and secure is a FSB (Financial Services Board) registered, approved & authorised financial service provider under Licence FSP 40592.

The website is internet secured and protected by Thawte Digital Certificates.

The directors of - Nick Brummer C.A. (SA) & Rod Lowe B.Com (Hons) C.F.P. - both have 20 years experience in the investment and financial services market in South Africa. is responsible for the investment advice on their website and Allan Gray is responsible for the administration of your unit trust investments once the application form has been received by them.

Allan Gray investment platform is an authorised administrative financial services provider. As the administrator, Allan Gray will collect your funds electronically from your bank account and invest your funds into the respective underlying unit trusts selected on the Allan Gray investment platform once your application form has been received.

Tailor made investment options


The risk profiler tool assists clients in choosing the correct suite of unit trusts (or unit trust portfolio) that best suits their profile as an investor.


The portfolio of funds is based partly on historical performance, but mostly on selecting the best quality fund management companies and individuals whom Investonline believes should outperform their peers in the long-term. By selecting a portfolio of three to four unit trust funds from a nucleus of 45 funds Investonline clients have a competitive advantage over the alternative investment routes available. Furthermore, clients can be confident that the nature of their advice is independent.


This guide was written by