Direct investment versus unit trust funds - 'pros' and 'cons'?

Once you have decide to invest, you have a choice of investing directly or through a unit trust fund. Which method is appropriate may well depend on your individual investment needs, however, using professional fund managers can generally provide better returns over the long-term.

Fund managers tend to outperform individual investors because:

• Their portfolios are constructed using a defined and consistent investment philosophy;
• Fund managers have a far greater access to quality information including company contacts, competitors and customers than do individual investors;
• Fund managers employ full-time investment professionals to monitor investment markets and the way economic developments affect these markets;
• The size of their portfolios generally means that fund managers can more easily reduce risk through greater diversification. They can also reduce risk by implementing sophisticated risk-management techniques involving the use of derivatives; and
• Fund managers have the economies of scale to reduce expenses through lower transaction costs. For example, fund managers generally pay much lower commissions to stockbrokers.