In the world of investing fund unitization refers to a type of investment that takes investment funds from multiple parties to pool them together to purchase a security. When a purchase is made, each buyer contributing to the pool owns a value of the funds share based on the total value of the fund and divided into units. This type of purchase is common and can be used to purchase various financial instruments, including widely purchased ones such as stocks and bonds.
Funds That Can Be Bought With Fund Unitization
- Mutual Funds: managed by a professional fund manager, mutual funds are composed of a portfolio of stock, bonds, and other securities in varying amounts and structures. Mutual funds are popular among investors due to the high levels of management, low costs, and diversification these types of funds offer.
- ETFs: an ETF or Exchange-Traded Fund can be traded like stocks and is designed to track specific indexes or sectors. Common examples include the S&P 500, large-cap funds, growth funds, and specific industries such as technology or consumer staples. ETFs are numerous and through unitization, you can build a diverse portfolio that is also financially accessible.
- UITs: are Unit Investment Trusts and are made up of a portfolio of securities. Managed by a trustee, these types of investments are useful if you want a fixed portfolio made of securities within a set period.
- CITs: standing for Collective Investment Trusts, a CIT resembles a mutual fund but can only be purchased by institutional investors such as a pension plan or a 401(k). A diverse portfolio is managed by a trustee or a bank. CITs can also be customized to follow different investment methodologies to fit your goals and needs.
Benefits of Fund Unitization
- Professional Management: management of your investments can be challenging if you lack the time or expertise to do so. With Fund Unitization, you can trust your investment to a professional securities manager. With skill, experience, and access to specialized resources, a fund manager can make sound investments with your money. Experienced fund management can also reduce risk.
- Diversification: when you diversify your investments you gain an extra level of protection and reduced risks. This is because diversification reduces the impact of company failures or downturns in particular industries or sectors of the economy. When properly diversified, your investment can properly handle the normal ups and downs of the stock market.
- Convenient: buying individual securities in an involved and complex process that requires a good deal of research. With fund unitization, you gain access to several companies in either a broad section of the economy or specific industries. Some funds exist that provide shares in the world market, giving you a broad investment on a global scale. As a one-stop solution, these types of investments provide a diversified portfolio without having to pick each company.
- Liquidity: unitized funds are relatively liquid meaning you can buy and sell them as needed, meaning you have access to your funds in case of an emergency or if you need to make some changes. This makes these types of investments far more convenient than individual securities, which are far more difficult to sell and buy.
Fund unitization gives everyday investors access to the stock market and the ability to invest funds in the hope of gaining a positive return. With several diverse and safe options available, it is easier than ever to build an investment strategy that works for you. Plus, professional advice is there to assist in selecting and managing your account. No matter if you’re looking for ETFs or mutual funds, these investment vehicles are accessible and effective.