In Part 1 we explored what a unit trust is and why you should get started. Here are four more reasons you should cross the threshold of investment in a Unit Trust Fund to start growing your own nest egg.  

5. Perks of Scale  

Unit trust funds, also known as collective investment schemes (CIS) are pooled funds, professionally invested in capital markets by fund managers who aim to deliver profit on their clients' investment. This solves a particular problem. Financial markets are exclusive; entry is based on capital, often non-attainable by a single investor. Multiple individuals with modest funds can however access financial markets when they combine their funds together.  

Better yet, as more people begin to pool their resources, the fund can diversify its investment portfolio. Think of it like going to the food market; the more money you have available, the more ingredients you can choose to enjoy from.  

Another benefit of scale is the low cost of service. Entering and exiting financial markets costs money, not to mention advisory and management fees due to the fund manager. Investing in a collective scheme spreads these costs across a larger investor base, reducing the burden on one individual.  

6. Professionally Managed  

Starting to invest in any market can be daunting and financial markets are no exception. A common misconception is that ordinary folk must learn about investing before they can start. Not the case for unit trusts.  

Thanks to regulatory requirements under the Capital Markets Authority of Uganda, licensed unit trust funds must be operated by professional financial managers, meaning that assets invested in the fund are strategically managed by experts according to the requests and desires of the investor.  

So where does an ordinary investor begin? First, ensure your fund manager is licensed by CMA, by visiting their website.  Once you’ve confirmed that the Fund Manager is indeed licensed, you can begin by setting goals. Your goals will be determined by your target amount and time of maturity.

For example, an emergency fund goal will vary in amount to your lifestyle and the time allocated to achieve it. This will be different from the goal of owning a home. The latter will cost more money and take more time. XENO employs this goal-based investment process of selecting investment instruments to ensure they are suitable for achieving your specific goals, within your risk profile and over the required investment period.  

7. Tax-exempt Income  

Another common misconception that underlies some people’s hesitation to invest in Unit Trusts is that income derived from these schemes is taxed under the Income Tax Act. This has been confirmed not to be the case in Uganda.  

A statement released by the Capital Markets Authority (CMA) highlights why there is a tax exemption incentive to earning an income through CISs. Saving remains a rare habit among people in Uganda (only 21% of people save) and a small percentage of the population actively contributes to their retirement, no less maintaining a ‘rainy day' emergency fund.   

Investors are rewarded for setting aside small monthly amounts used to finance government bonds and treasury bills, as well as for participating in the share market. Returns from debt-raising and equity instruments in the financial markets can allow investors to anticipate a tax-free monthly income on their investment, subject to the performance of their selected investment vehicles. This money ultimately helps investors achieve their financial goals.  

8. Flexibility 

If you’ve ever inquired at a bank about a fixed deposit account, you’ve likely been met with conditions that sound like your money is going to be held up in a vault somewhere, for five or so years until it matures with interest. Anything before that, and your interest is cut or worse, you pay a penalty or a withdrawal fee. That is why they call them fixed after all. 

This setup works well for banks whose key goal is having stable deposits - but not always for the customer. Now, not that it's bad to store cash away for long periods (in fact it is advisable) however, one or two of us may encounter a big enough emergency that requires dipping into our funds.  

The prudence of investing in a unit trust fund is that it offers you just enough flexibility to save, invest and withdraw at any time. Think of it as an investment account that you can access without a strict maturity period, and without penalties. You are probably holding your breath, wondering where the floor drops.  

Every time you invest or withdraw your investment from a unit trust account, your shares in the collective fund are either purchased or sold. This process of allocation and dissolution happens within 2 to 5 working days, with no penalties. The real catch is that the more you withdraw than save, the more these savings won’t accrue compounding interest to help achieve your goals faster.  

I hope we can agree that an investment account makes perfect sense for everyone's financial standing. As your personal investment manager, XENO makes investing for your goals easy. Simply dial *165*5*7# on MTN to start, download our mobile app or visit our website and you can begin investing with as little as UGX 10,000.