Unit Trusts and OEICs

Discounted Funds - Initial Sales Charges 0% - 0.25%

TD Waterhouse gives you access to over 1,000 unit trusts and OEICs (Open Ended Investment Companies) from the UK's top fund providers, with initial sales charges from 0%.

Research tools provided by Morningstar allow you to research funds and their past performance. Use our fund selection tools to help you find the funds that meet your needs.

5 reasons to invest in funds

Minimise risk - Due to the range and diversity that the pooled money is invested in (bonds, shares, gilts etc) the inherit risk is generally reduced as opposed to individual shares.
Simplicity - Funds can allow ease of access and ease of use and you can redeem your fund at short notice if the need arises.
Tax efficient - If you put your funds in an ISA or SIPP, your investments will be free of income tax and capital gains tax.
Range of choice - As there are hundreds of funds available, you are more likely to find one that matches your risk levels and investment goals.
Access to a wider range of markets - Funds can give you access to markets not available with normal share trading.

What are Unit Trusts and OEICs?

Unit trusts and OEICs are a form of collective investment where investors' (shareholders) money is pooled together and invested on your behalf by professional Fund Managers, who buy a range of:

Shares
Gilts
Bonds
Cash deposits

Both are open-ended funds meaning that the size and value of each fund can vary according to supply and demand. They provide the means of investing in a broad selection of shares, which, in turn, reduces the risks of investing in individual shares.

Unit trusts and OEICs can be grouped into three main types:

Income funds that generate income in the form of dividends or interest
Growth funds that can produce capital growth for investors
Specialist funds that invest in niche sectors or a particular country/region

There are further sub categories within these types each come with their own levels of risk. You can learn more about these types and a guide to their risk assessment at Incademy investor education

How do Unit Trusts & OEICs work?

When you invest in a Unit Trust you buy a unit, or a portion of the total fund. OEICs work slightly differently as they issue shares. The fund manager will invest the money on behalf of the unit holders (or shareholders). Each unit trust and OEIC has its own investment objective and the fund manager has to invest in order to achieve the overall objective. The value of the investment will vary according to the total value of the fund, which is determined by the investments the fund manager makes with the fund's money.

How risky are Unit Trusts & OEICs?

There are hundreds of funds to choose from. To help investors find the best fund to meet their investment objectives, we have grouped the main funds types into three risk categories:

Lower Risk - Cash or Money Market Funds

Value of investment is less likely to fall, although the return may vary.
Closely resemble bank or building society accounts but with potentially higher yields.
Even small deposits attract top money market interest rates and the customer is not locked in.
Typically these are most suitable for investors wishing to invest in the short term e.g. 1 - 2 years.

Medium Risk - Bond Funds or mix of Equity Income and Bond Funds

Value of investment may fall as well as rise in the short term.
Bond Funds provide investors with a good level of income and some growth of capital in a low to medium risk environment. Most bonds pay a fixed interest rate and though the price may fluctuate, it does so less than a share.
UK Bond Funds feature in Gilt, Corporate Bond & other bonds sectors, but some funds invest internationally, where managers take advantage of varying interest & currency rates.
UK Equity & Bond Funds combine both UK bonds and UK company shares. They provide a relatively good income stream & more security of capital than a fund solely investing in shares, sometimes referred to as balanced funds.
Global Bond Funds - usually better suited to savers with long term horizons, as they have additional currency risks due to their global nature.
Typically, these are most suitable for investors wishing to invest over the medium term e.g. 3 - 5 years.

Higher Risk - Equity Funds or mix of Equity Income Funds or mix of Equity Income and Bond Funds

Rollercoaster in short term - sharper rises and falls.
Aim for growth in capital and income.
Vast choice of funds or possibilities for combinations of funds to achieve these objectives.
Investing in equities over periods of five years or more provides growing income as well as increasing capital values, outpacing inflation rate.
Suitable for investments over the longer term e.g. 5 years+.
This is the most popular class in the UK with over 80% of retail unit trusts.

What do Unit Trusts & OEICs cost?

Unit trusts and OEICs are priced differently. Unit trusts have two prices; a buying (offer) and a selling (bid) price. OEICs have one price at which you buy and sell.

TD Waterhouse does not charge commission on unit trust & OEICs trading but the fund manager makes a charge for their management and administration costs. These charges can take the form of:

An initial sales charge (when you buy units). TD Waterhouse offer over 1,000 unit trusts & OEICs with discounted sales charges from 0%.
As an annual management charge (AMC).
As an exit charge (when you sell units), although this is rare.

Charges for buying unit trusts are reflected in the difference between the buying and selling prices. Charges for OEICs are made on top of the fund price.