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•34 The 100 Greatest Business Ideas of All Time

Idea 24 – Greatest ways of winning in the stock market?
Run a unit trust

I suppose there is no such thing in the stock market as a guaranteed winner, but it’s

hard to believe that managing a unit trust is not just that. The concept is simple.

Although unit trust managers would rarely put it like this, their great business idea is

that you give them your money to invest in equities, and they will take 5 or 6% of it

before they start investing and then each year 1.5% of the value of the investment no

matter how successful the investment proves to be. If they double your money in a

year they take their 1.5% and if they halve it they do the same.

If using a unit If using a unit trust reduces the risk of having too many eggs in the

trust reduces the same basket for investors, then how much more is the risk reduced for the

risk of having too fund managers who develop a range of unit trusts?

many eggs in Look at it this way. A well-known con in racing is for someone, ap-

the same basket parently in the know, to sell tips for a fixed price plus a percentage of any

for investors, winnings. The fixed price is the tipster’s guarantee, while the punter will

then how much in any case tend to pay the percentage of a win in order to stay on the

more is the risk oracle’s books. Oracle is certainly the right word if the tipster is actually

reduced for the tipping every runner to someone and therefore always has a winner to

fund managers advertise to new punters. You would never fall for that, would you?

who develop a And yet the concept that unit trust managers bring to customers is

range of unit remarkably similar. They offer a multiplicity of trusts in this country and

trusts? abroad, growth and income, separate industry sectors, emerging markets

and so on. The chances have got to be pretty good that at any moment in

time the unit trust manager will be able to point to at least one of his trusts

that is performing well. This draws in more money and the managers take their 5%

up front and 1.5% per annum. It’s brilliant.

It’s not so brilliant for the investor. It is true that a unit trust spreads small

investors’ risk. They are able to buy into a spread of shares, which is difficult to do

if they are only investing small amounts, and the opportunity to get easily into for-

eign shares is a definite advantage over doing it yourself. The second main argu-