Unit trusts pool money of many people and invests it in shares, bonds, money market instruments and other investments. This pool is then divided into identical units (participatory interests), each unit containing the same proportion of the assets in the portfolio.

Unit Trusts are professionally managed by licensed fund managers (licensed by the Securities and Exchange Commission), who will be best placed to select the stronger investments. By investing in unit trusts it enables an individual investor to benefit from diversification benefits that might not be available to individual direct investors.

Given that each unit trust (or participatory interest) is exactly equal, and that the sum of all units in a particular unit trust equals the value of the portfolio, it follows that the value of one unit can be easily calculated by dividing the value of the portfolio by the numbers of units in issue. The net asset value of the investments in the portfolio less any liabilities due by the fund (such as administration costs not yet paid).

Unit trusts usually set a minimum investment amount to invest – investors can choose to invest a lump sum or make regular monthly debit orders with their banks. Unit trust management companies are required to operate their investments within the applicable laws and regulations. In Zambia they are required to primarily comply with the Securities Act. They are also mandated to be bona fide members of the Capital Markets Association of Zambia.

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