Units and unit prices
When you invest in a fund, you are allocated a number of
units in the fund. Each unit represents an equal part of the
market value of the portfolio of investments held by the
fund. The unit price is calculated by taking the total value
of all of a fund’s assets on a particular day, adjusting for
any liabilities, then dividing the net fund value by the
total number of units held by all investors on that day.
The number of units you receive depends on the amount you
invest and the current unit price. For example, if you were
to invest $10,000 in a fund with a current unit price of $2,
you would receive 5000 units.
Over the course of your investment, the fund manager
regularly resets the unit price, usually on a daily basis.
The unit price reflects the current value of the fund’s
assets, less the cost of administering the fund. For
example, if the fund invested in Australian shares, and the
value of its share portfolio rose, then its unit price would
also rise.
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Exiting a fund
For most funds, there is a difference between the entry and
exit unit price. The difference reflects the fund’s
transaction costs when buying investments (when money is
added to the fund) and selling investments (when withdrawals
are made), and is often called the buy/sell spread.
When you wish to end your investment and access your funds,
you apply to the fund manager to withdraw your units. The
amount you receive is calculated according to the number of
units you hold and the current exit price. So, if you hold
5000 units, and the exit price when you withdraw your
investment is $2.50 per unit, you will receive $12,500.
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Fund distributions
Most funds pay you income in the form of regular fund
distributions. These distributions represent income earned
by the fund from its assets — for example, rental income
from property, or dividends from shares. You may have the
option of reinvesting your fund distributions by buying
extra units.
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Matching asset classes to your
investment objectives
Here’s an overview of the different investment outcomes you
might expect from investing in different asset classes.
|
Asset Class |
Income |
Growth |
Tax Effective |
Risk |
|
Cash |
Low |
|
|
Low |
|
Fixed Interest |
High |
Low to Medium |
|
Low |
|
Property |
High |
Medium |
Medium to High |
Medium |
|
Australian Shares |
Medium |
Medium to High |
Medium to High |
Medium |
|
International Shares |
Low |
High |
|
High |
|
|
| |
|
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