The power of choice: Why combining shares and unit trusts enhances investor outcomes 

When I first entered the investment industry, South African investors had just 39 retail unit trust funds to choose from. Back then, selecting a fund was far simpler than picking individual shares. Today, the landscape looks very different. There are now more unit trust funds available than there are shares listed on the JSE. While this abundance can seem overwhelming, it doesn’t have to be, especially if investors have the right guidance. 

More importantly, this isn’t a challenge but an opportunity

A one-size-fits-all approach rarely works when it comes to building wealth or achieving financial freedom. That’s why giving clients the option to invest in both shares and unit trusts is far more than a ‘nice-to-have’, it’s a vital part of creating a personalised investment strategy. When structured correctly, this dual approach can be a game-changer for both advisers and their clients. 

Here’s why: 

1. Diversification 

While unit trust funds offer inherent diversification, supplementing them with a share portfolio allows for more targeted exposure, whether to specific companies, sectors, or asset classes. The combination of both provides a balance: mitigating risk on the one hand, while creating opportunities for enhanced returns on the other. 

2. Personalised risk management 

No two investors are alike, and their risk tolerance can evolve over time. While unit trusts generally offer lower volatility, a well-structured share portfolio can incorporate protective elements like bonds or structured products. This flexibility allows investors to adjust their asset mix according to their life stage, market view, and comfort levels. 

3. Professional management 

Whether investing in unit trusts or a tailored share portfolio, clients benefit from expert oversight. This is essential, as most individuals lack the time or expertise to manage investments daily. What’s more, a share portfolio provides an added layer of opportunity, enabling clients to pursue tailored growth strategies that align with their goals or market outlook.  

4. Liquidity and flexibility 

Both unit trusts and shares are relatively liquid, but they serve different functions. Shares can be traded swiftly to capitalise on market movements, while unit trusts are structured for long-term growth. The ability to access both instruments gives clients the flexibility to adapt to both short- and long-term financial needs. 

5. Cost efficiency and tax planning 

While share portfolios may carry lower direct fees, unit trusts offer built-in efficiencies, such as capital gains tax deferral. When used together, these investment vehicles support a more cost-effective and tax-efficient approach. Additional benefits can be unlocked through tax wrappers like endowments or retirement/living annuities, which also support estate planning and legacy building. 

6. Goal-oriented investing 

Clients have varied and evolving goals. Unit trusts are ideal for long-term goals, allowing for regular contributions and compound growth. Shares, on the other hand, can be used to seize shorter-term market opportunities or to align with specific values, such as environmental, social, and governance (ESG) investing. A share portfolio also opens access to structures or asset classes not available within certain tax wrappers, offering further protection, whether the goal is capital preservation or income generation. 

Ultimately, offering clients the ability to invest in both unit trusts and shares empowers them with choice, control, and a more holistic path to building wealth. This combination supports a broader range of financial objectives, investment styles and most importantly, flexibility. 

In a rapidly changing world, flexibility is no longer a luxury, it’s essential. 

Should you require any further information, please contact our Momentum Securities Client Services team on 011 550 6270 or email ms.cs@momentum.co.za or visit our website.