How do we at Quintus Wealth choose unit trusts to get targeted returns over time? This is a question we often get asked. We do not have a crystal ball to see what the future in stock markets will hold nor are we able to rely on the past. In order to create wealth for our clients, we follow an investment process, choosing unit trusts forms part of the wealth creation.
Choosing a unit trust to achieve a targeted return over time involves a careful evaluation of various factors. Unit trusts are managed investment funds that combine money from multiple investors and investment managers to invest in a diversified portfolio such as equities, bonds, cash, and property, depending on the objective and mandate of the unit trust. These are some of the steps we follow when choosing unit trusts:
- Define your Investment Goal: The first step is to establish a clear and realistic investment goal. This goal should include the desired return over a specific time horizon and consider your risk tolerance and financial situation.
- Risk Profile Assessment: We will assess your risk profile to determine your willingness and ability to take on investment risks. Factors such as your age, income, financial responsibilities, and previous investment experience will be considered.
- Time Horizon: The investment time horizon is critical in determining the appropriate investment strategy and asset allocation. The longer time horizons may allow for a more aggressive investment approach, while shorter time horizons may necessitate a more conservative approach.
- Asset Allocation: Asset allocation refers to the process of distributing investments among different asset classes, such as equities, fixed-income (bonds), cash, and other alternatives. At Quintus Wealth, we will create an asset allocation strategy based on your goals and risk tolerance, wealth, and income objectives.
- Performance History: Analyzing the historical performance of different unit trusts is crucial. While past performance does not guarantee future results, it can provide insights into how the fund has performed under various market conditions.
- Fund Manager’s Track Record: The fund manager’s expertise and track record are essential considerations. An experienced and skilled fund manager can play a significant role in achieving the targeted return.
- Expense Ratios: The expense ratio represents the annual cost of managing the unit trust and is expressed as a percentage of the fund’s assets. Lower expense ratios are generally favourable as they reduce the drag on the fund’s performance, which impacts wealth creation.
- Fund Size and Liquidity: The size of the unit trust and its liquidity can impact performance. Very large funds might face challenges deploying capital effectively, while illiquid assets could hinder the fund’s ability to meet redemption requests.
- Fund Holdings and Diversification: Reviewing the unit trust’s holdings and diversification strategy is essential. A well-diversified fund can help reduce risk and improve the likelihood of achieving the targeted return.
- Investment Philosophy and Strategy: Understanding the unit trust’s investment philosophy and strategy is crucial. Some funds might be more growth-oriented, while others might focus on income generation or value investing.
- Investment Restrictions: Some unit trusts may have specific investment restrictions, such as geographic limitations or sector preferences.
- Risk Management: We will assess the risk management practices of the unit trust to understand how potential risks are monitored and mitigated.
By carefully evaluating these factors and conducting thorough and ongoing research, we will select suitable unit trusts that align with your objectives and increase the likelihood of achieving the targeted return over the specified time frame and achieving wealth creation. It is essential to remember that the investment decisions we make follow a set process, and take into consideration each of our client’s unique circumstances in order to achieve wealth growth for our clients.