Here are a few basic tenets of investing, both for those already in the know and those hoping to cautiously test the investment waters.
What’s the difference between saving and investing? How do I start?
The terms saving and investing are often used interchangeably. While there are similarities, there are also fundamental differences. Saving is a prelude to investing and refers to the practice of keeping aside money on a regular basis, to be accessed later. While interest is accrued on savings, investment is a step further, where one attempts to grow one’s money and build wealth. Investment is a more active process than saving and varying investment tools contain varying elements of risk.
Navigating diverse investment tools can be perplexing for the average investor. Investor education is crucial as knowledgeable and empowered investors contribute towards a vibrant market. Unit trusts are one of many investment options available to investors. The following explores the mechanisms and types of unit trusts in the Sri Lankan market.
Understanding Unit Trusts
Think of a unit trust as a pooling vehicle, where you gather relatively small investments from a large number of investors to make one large fund. This pool of funds is then invested in different financial instruments. The income earned from these investments is shared by the respective unit holders in proportion to the number of units owned.