If you’re new to the world of investment you’re probably still trying to figure out the nuances of the stock market. What you may not know as yet is that there are many options available through you which can ease some of your anxiety around investing. For starters, you may want to consider a unit trust or mutual fund.

According to the junior investment management associate at the Jamaica Money Market Brokers Group (JMMB Group) Omari Douglas, “A unit trust is a collective investment scheme where funds are pooled by the unit holders and invested across various asset classes including stocks, bonds and other instruments. It is done according to a particular investment strategy.”

This type of investment product is especially ideal for beginner investors or investors who do not have the time to manage their own portfolio.

“You can either invest in individual stocks yourself and you’d be responsible for the investment decisions and the research to make the right picks. On the unit trust side, you’re giving the investment manager of the unit trust the task of investing the funds for you. So, the investment manager would have the wealth of knowledge, the resources and the education to make the right picks and achieve a particular return for you,” Douglas explained as he outlined two of the options available to investors who are new to the market.

Another advantage of the unit trust product is that you don’t have to deposit a large lump sum to start. “You should be able to open a unit trust product with as little as $15,000,” the investment professional stated.

Other great wins of engaging in a unit trust include: diversification, above-average returns, lower risk compared to direct exposure and the management of the portfolio.

“Small investors generally won’t be able to have exposure to certain asset classes like real estate or bonds where the minimum investment amount is pretty large, that client would fit in the category of a unit trust. They’d be able to get a diversified pool of assets through the unit trust. Another type of investor which would be ideal for this subset is the investor that doesn’t have the expertise or time to do the picks and be able to rebalance their portfolio,” Douglas added.

But the unit trust option is not without its limitations.

“There’s always a risk reward trade- off — the higher the risk you take, the higher the potential return. As an individual, you may be able to invest 100 per cent in one stock and that stock moves 100 or 200 per cent, with the unit trust product the chances of that happening are slim because at the same time we’re looking for superior returns while managing risk. So, no unit trust funds in the industry would have that high concentration to a particular stock. You’re limited to the amount of risk that you can take.”

Nevertheless, it’s still a product which is likely to yield significant return without over-exposing new investors to exorbitant risk.

“With a unit trust, at the very least, you should be able to outperform inflation. There’s the power of compounding so, a small amount is added every month and you’ll get an annualised return of about 10 per cent. Overtime, you should be able to reach your goals quicker than some other products,” said Douglas.

He noted there are various types of unit trusts including: balanced funds, equity funds, exchange traded funds (ETF), fixed income funds, index funds, international equity funds, money market funds, real estate investment trusts (REITS) among others.

Although Douglas advises that investors should leave their funds and allow it to grow, he highlighted that unlike other investment options, it is easier to convert your asset to cash with a unite trust.

“With the unit trust product at any point in time — whether you’ve invested in a real estate-based product, equity or bond portfolio — you’d be able to come in any day, sell those units and get cash. When compared to the outright investment in real estate, for example, it’s not that liquid and even with equity or individual stocks, you have to have a T+3 or T+2 time period before you get your cash.”