First
Independent Direct Unit Trusts and OEIC's
First Independent Direct Unit Trusts and OEIC's
You
may already have shares in an Oeic (pronounced 'oik') without
knowing it. An OEIC, open-ended investment company, is the
investment vehicle replacing many unit trusts.
Several
of the household named insurance and investment companies
have already converted their unit trusts into Oeics. It is
believed many others, perhaps most, will follow suit.
Basically,
Oeics are like unit trusts and are a flexible and relatively
cheap way to invest in the stock market. They are run and
regulated in a similar way, and you can hold them in an ISA
or PEP.
The
difference being that unit trusts usually have two prices
- the 'bid' which is the lower price you receive when you
sell, and the slightly higher 'offer' price you pay to invest.
The difference between the two prices is commonly known as
the bid/offer spread.
With
Oeic's there is just a single price to buy and sell shares,
so it's easier to see the actual effect of charges. However,
this advantage may not last forever as unit trusts are expected
to become 'single-priced' eventually, with some already so.
It
can cost fund managers less to run an Oeic than a unit trust,
so some companies cut initial charges when they converted
their unit trusts, although annual charges remain much the
same.
Another
advantage of Oeics is that it may be cheaper to switch between
a manager's different funds than between unit trusts because
of the Oeic's structure. Each may be made up of various sub-funds,
and when you buy shares in an Oeic you actually invest in
one or more of the sub-funds. Changing between sub-funds eg
UK for European or vice versa, is easier than switching between
completely separate unit trusts. Several Oeic managers have
therefore cut switching charges or even offer free switches.
That
is not to say that all Oeics are better than all unit trusts,
there are many other factors beside that the investor should
consider. And naturally, Oeics are only one way of investing
for the future. With a whole array of investment vehicles
on offer to today's investor, remember First Independent Direct
are here to help guide and advise you wherever possible.
For
further information on First Independent Direct Unit Trusts
and OEIC's visit the First Independent Direct website.
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