Unit Trust for Dummies
noun
pronunciation: 'junɪt_trəstWhat does Unit Trust really mean?
Unit Trust is a term that refers to a type of investment fund that is created to pool together the money from various investors. Now, imagine a group of people joining hands to contribute their money into a big pot. This pot of money is then used by a professional fund manager to invest in different types of assets, such as stocks, bonds, or even real estate. The aim is to earn a return on the investment, which means making the money in the pot grow over time.
So, let's break it down further. The term "unit" in unit trust represents the way the pot of money is divided among all the investors. It's much like having a pizza that is cut into many slices. Each slice represents a unit, and every investor who contributes to the unit trust will own a certain number of those units. These units indicate how much of the overall pot of money each investor owns.
To give you an analogy, think about a bag of candies. If you have 10 candies in the bag and you decide to share them equally with your friend, each of you will have 5 candies. Similarly, if you and other investors contribute money to a unit trust, you will each own a certain number of units, which represents your share of the overall investment. The more money you put in, the more units you'll have.
Now, here comes the interesting part. When the investments made by the fund manager perform well and earn profits, the value of each unit will increase. It's like the candies in your bag growing bigger! So, if you decide to sell your units when their value has gone up, you will get more money back than what you initially put in. This is called capital appreciation. On the other hand, if the investments don't perform well and the value of the units falls, you may get back less money than what you invested. This is known as capital depreciation.
Not only that, another cool thing about unit trusts is that you can make money even without selling your units. How does that happen? Well, the fund manager may distribute the income earned from the investments as cash payments, much like receiving pocket money. These payments, called dividends, are given to the unit holders. So, it's like getting a bonus from the candy factory!
In summary, a unit trust is like a big pot of money that is created by a group of investors. Each investor owns a share of the pot, represented by units. The pot of money is then managed by a professional who invests it in various assets. When the investments perform well, the value of the units increases, allowing investors to earn more money. Additionally, they may also receive dividends, which are like extra cash payments. Just like sharing candies or enjoying the rewards from a candy factory, unit trusts can be a tasty way of growing your money!
So, let's break it down further. The term "unit" in unit trust represents the way the pot of money is divided among all the investors. It's much like having a pizza that is cut into many slices. Each slice represents a unit, and every investor who contributes to the unit trust will own a certain number of those units. These units indicate how much of the overall pot of money each investor owns.
To give you an analogy, think about a bag of candies. If you have 10 candies in the bag and you decide to share them equally with your friend, each of you will have 5 candies. Similarly, if you and other investors contribute money to a unit trust, you will each own a certain number of units, which represents your share of the overall investment. The more money you put in, the more units you'll have.
Now, here comes the interesting part. When the investments made by the fund manager perform well and earn profits, the value of each unit will increase. It's like the candies in your bag growing bigger! So, if you decide to sell your units when their value has gone up, you will get more money back than what you initially put in. This is called capital appreciation. On the other hand, if the investments don't perform well and the value of the units falls, you may get back less money than what you invested. This is known as capital depreciation.
Not only that, another cool thing about unit trusts is that you can make money even without selling your units. How does that happen? Well, the fund manager may distribute the income earned from the investments as cash payments, much like receiving pocket money. These payments, called dividends, are given to the unit holders. So, it's like getting a bonus from the candy factory!
In summary, a unit trust is like a big pot of money that is created by a group of investors. Each investor owns a share of the pot, represented by units. The pot of money is then managed by a professional who invests it in various assets. When the investments perform well, the value of the units increases, allowing investors to earn more money. Additionally, they may also receive dividends, which are like extra cash payments. Just like sharing candies or enjoying the rewards from a candy factory, unit trusts can be a tasty way of growing your money!
Revised and Fact checked by Michael Garcia on 2023-10-29 22:15:59
Unit Trust In a sentece
Learn how to use Unit Trust inside a sentece
- When you and your friends come together and each put some money in a pot to buy snacks, that's like a unit trust. Everyone contributes a little to form a big 'pot' of money for a common purpose.
- Imagine a big container with different types of candies inside. Each candy represents a small portion of the whole container. That container is like a unit trust, where different people put their money together to make a big investment.
- Let's say you and your classmates decide to collect some money to buy books for your school library. Each student gives a small amount of money, and when combined, that's your unit trust. It helps you all achieve a bigger goal together.
- Imagine you have a big jar of marbles. Each marble represents a little bit of money. When many people put their marbles in that jar, they are creating a unit trust. It's like pooling everyone's marbles together to achieve something bigger.
- Picture a piggy bank where you and your family members deposit money regularly. All the coins and bills inside the piggy bank form a unit trust. It's like a team savings account that allows you to grow your money together.
Unit Trust Synonyms
Words that can be interchanged for the original word in the same context.
Unit Trust Hypernyms
Words that are more generic than the original word.