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Unit Trusts Explained: Diversify Your Portfolio Easily

Dec 11, 2025

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Want to diversify your investments without the complexity? Unit trusts offer a simple way to invest in a variety of assets. Learn how they work, their benefits, and how to choose the right fund.

What are Unit Trusts?


A Unit Trust is a collective investment scheme where money from multiple investors is pooled together and managed by professional fund managers. Your investment is divided into units, and you own a portion of the entire fund.


How Unit Trusts Work


When you invest in a unit trust, you're buying units at the current Net Asset Value (NAV). The fund manager invests your pooled money in various assets like stocks, bonds, and money market instruments.


Key Players

  • Fund Manager: Makes investment decisions on behalf of investors
  • Trustee: Safeguards investors' interests and holds assets
  • Custodian: Holds the securities on behalf of the fund
  • Unit Holders: The investors who own units in the fund

Types of Unit Trust Funds


1. Money Market Funds

Risk Level: Low

Best For: Short-term goals, emergency funds


2. Bond Funds

Risk Level: Low to Medium

Best For: Medium-term goals, regular income


3. Balanced Funds

Risk Level: Medium

Best For: Moderate growth with some stability


4. Equity Funds

Risk Level: High

Best For: Long-term growth, wealth accumulation


Benefits of Unit Trusts


  • Professional Management: Experienced professionals research and select investments.
  • Diversification: Gain exposure to a wide range of assets, reducing risk.
  • Affordability: Start with as little as KES 1,000.
  • Liquidity: Redeem your units at any time to access your money.

How to Choose the Right Unit Trust


"The best unit trust for you depends on your financial goals, risk tolerance, and investment timeline."

Consider These Factors:

  1. Investment Objective: What are you saving for?
  2. Time Horizon: How long can you invest?
  3. Risk Tolerance: How much volatility can you handle?
  4. Fees and Charges: Compare management fees across funds

Understanding Fees


Unit trusts charge various fees that impact your returns:

  • Initial Fee: Charged when you buy units (0-5%)
  • Annual Management Fee: Ongoing fee for fund management (1-3% per year)

Getting Started


Step 1: Define Your Goals.
Step 2: Assess Your Risk Profile.
Step 3: Choose a Fund Manager.
Step 4: Open an Account.
Step 5: Start Investing.


Maximizing Returns


  1. Invest Regularly: Use dollar-cost averaging.
  2. Reinvest Dividends: Benefit from compounding.
  3. Stay Invested: Avoid frequent buying and selling.

Conclusion


Unit trusts offer an excellent way to diversify your investment portfolio without requiring extensive market knowledge. Remember: start small, invest regularly, and stay focused.