The Efogen Investment Club blog

There is a big debate amongst investors as to which way is the best way to invest on the stock market – by yourself through a stock broker, or rather through unit trusts.

There are many advantages that a unit trust has over an individual investor:

1)       By pooling the money together the costs are lower

2)       There is a “professional” investor who does all the work for you

3)       You can passively invest

4)       It is a lot less stressful as you don’t need to worry about investing

5)       Your risk is lower due to diversification (and so is your return)

However when investing in a unit trust there are costs which, as Warren Buffet puts it, “eat into your investment pie”. Costs involved are the costs of paying the fund managers salary, his bonus, the admin costs, the trading costs, the companies share of the profits, taxes, audit fees, bank charges etc.

So while investing in unit trusts is a good way to invest for long-term returns, the costs involved are too heavy to make any decent return in the short term.