I have decided to summarise what I have spoken of for the last 3 weeks, that being my Trilogy on explaining a bit about unit trust funds. There will always be more that I could write, but I think I have covered enough. Many of you have let me know how these newsletters have helped you to understand a bit more. I’m glad for that.
So a brief summary:
- A unit trust fund is an entity that invests in and owns shares of companies listed on stock markets as well as other assets like cash and bonds.
- You and I can own tiny parts of that entity through owning units.
- You are actually owning tiny fractions of companies that you spend your money at. Take that in.
- Fund managers buy and sell the underlying shares on our behalf.
- They go to shareholder meetings on our behalf.
- Share prices sometimes go up and down for no good reason but investor sentiment or investor bad behaviour.
- A seller of shares needs a buyer. A buyer of shares needs a seller. No seller means a buyer cannot buy.
- A unit trust fund owns around 3% in cash to help with the ease of withdrawals for investors. A unit trust fund manager does not need to find a buyer.
- The last trade of the day – the last buy or sell of a share at the end of any particular day – gives the closing price of that company on that day on the stock market. Those closing prices give us our unit trust fund values at the end of that day.
On a last by-the-way note, over the years I have walked past the desks of many fund managers at most companies that I use. This has allowed me to see them at work behind their array of large computer screens, keeping watch on stock markets around the world. I have walked past the guys at Coronation, Allan Gray and Foord in Cape Town, the Marriott guys in Hillcrest, the offshore people at Sarasin, Investec and Orbis in London and then also FIM Capital (Marriott’s offshore colleagues) on the Isle of Man. It gave me a feeling of what happens at the coal faces of the funds I bring to clients.
Maybe another epic saga of something to take you through will come to mind in due course. Until then…