According to investment wisdom, you should keep your money in unit trusts for the medium to long term - between three and five years.
But even with that in mind, you may have cause to move your money between funds from time to time. For example, if you are trying to maintain a balanced portfolio, with a certain percentage in each of the asset classes of equities, bonds, property and cash. When one class has performed well and appreciated nicely, you may need to decrease your holding in that class and increase your holdings in the other classes.
Whatever the reason, if you think you will need to move money between unit trust funds, you may find the services of a linked investment service provider (Lisp) useful.
Lisps offer you the opportunity to invest in a range of funds and switch between them conveniently at reduced costs. This is because the Lisps are able to buy the funds in bulk from unit trust companies.
In most cases, you can access the services of a Lisp through a financial adviser, and most will offer online monitoring of your investments, but one Lisp, Equinox, offers a fully fledged online service, which means you can do business with it directly on the internet at http://www.equinox.co.za.
In return for a monthly fee, Equinox offers you the opportunity to invest in almost every unit trust and money market fund in the country. This includes the funds of some of the boutique managers who only accept large sums, making it difficult for smaller investors to access them.
By investing through Equinox, you can bypass the investment minimums set by the unit trust companies. In addition, you can save on initial fees. Initial fees on unit trusts vary between nothing on money market funds and 5.7 percent (including VAT) on equity funds.
But if you invest through Equinox, the maximum initial fee for investments of more than R5 000 is 1.65 percent (including VAT). This fee is made up of 0.28 percent (including VAT), which is paid to the management company, and Equinox's fee of 1.37 percent (including VAT).
On a unit trust with an initial fee of 5.7 percent, you therefore pay about four percentage points less by investing through Equinox.
However, you should remember that not all management companies charge the maximum fee, which is made up of an administration fee and commission for the financial adviser. While some unit trust companies charge the maximum fee regardless of whether you use an adviser or not, others reduce the fee to the minimum if you do not need advice and you approach them directly.
The services of a Lisp such as Equinox are usually most appropriate for investors who are likely to incur significant initial charges because they plan to switch unit trust funds.
You should also ensure that you have enough to invest to make your investment cost-effective. Equinox's initial fee is subject to a minimum fee of R68.40 (including VAT), which means the initial fee may be higher than 1.65 percent on amounts of less than R5 000.
The portion of the initial fee levied by Equinox also varies depending on the amount you invest. For the first R300 000 you invest in a fund, the fee is 1.37 percent, but this reduces to 0.91 percent (including VAT) on the next R300 000 you invest in a fund through Equinox. The fee is 0.45 percent on amounts between R600 000 and R1.2 million, and it is 0.11 percent on amounts over R1.2 million.
The monthly fee that Equinox charges (including VAT) amounts to 0.68 percent a year of your investments up to R600 000; 0.34 percent of the next R600 000; 0.17 percent of the next R1.8 million and 0.11 percent of the balance above R1 million. The minimum monthly fee is R34.20 (including VAT), which means the fee will be higher than 0.68 percent on amounts of less than R5 000.
You also pay the monthly unit trust management fee (usually about one percent of your investment, but it could be up to two percent).
If you want to switch from one unit trust into another fund with the same management company, Equinox charges you R68.40 per fund you switch into.
Usually, management companies charge you a fee of between zero and 0.28 percent (including VAT) to switch between their funds.
If you want to switch into a unit trust fund with another company, Equinox will charge you 0.28 percent including VAT) of the switched amount, subject to a minimum of R68.40 (including VAT) and a maximum of R855.
When you are switching between funds, you can make a substantial saving on the initial fees you would pay if you were not switching through Equinox.
Equinox says that "if you switch just once a year, after five years your investments could be worth about 20 percent more than if you had invested in the same funds through anyone else" - even after taking Equinox's annual management fee into account.
According to the website, Equinox is able to offer "the lowest fees" because its administration system has been developed to take full advantages of the efficiencies of the internet.
However, despite these claims, the Lisp industry is competitive and you should shop around as the fees you will pay depend on the size of your investment and the number of transactions you perform.
Emile Wessels, the head of product development at Innofin, Sanlam's linked product provider, says Equinox's fees are competitive, especially for small investors, but they are not always the cheapest.
Wessels says it is possible to find Lisps with lower charges than Equinox for certain investment amounts and transaction volumes.
If you invest through Equinox, you can compile your own portfolio of unit trust funds - called a discretionary portfolio - or, at an additional fee, you can invest in one of Equinox's three managed portfolios.
These three risk-profiled portfolios, ranging from conservative to aggressive, are managed by Oryx Investment Management. The additional annual management fee on these portfolios is 1.14 percent (including VAT), making a total management fee of between 1.25 and 1.82 percent (including VAT) on these funds, depending on the amount you invest.
The portfolios have had total returns - before costs - ranging between 68 percent and 107 percent over the past three years.
You can use internet banking, a debit instruction or a direct deposit to pay for investments made through Equinox. There are no minimum investment amounts or withdrawal constraints on any of the portfolios, but Equinox does recommend that you invest at least a lump sum of R5 000 or a debit order of R500 to ensure that the costs you are paying will be less than the reasonable return you can expect in the long term.
For investors with smaller amounts of about R500 to invest by debit order, Equinox has set up a Start-up Portfolio. Start-up Portfolio investors are not charged initial fees for either lump sum or debit order investments, but annual fees are levied in the normal way.
When you buy units through Equinox, your units - as is the case when you buy unit trusts through any Lisp - are registered in the name of an independent custodian company, but you are the legal and beneficial owner of all the funds purchased on your behalf. This protects you in the event of Equinox going insolvent. The company has, however, been in operation for five years now.
If you are already invested in unit trusts, you can move your investments to Equinox. All you need to do is complete a transfer application form, which can be emailed to you. There are no additional initial costs.
The beauty of having your unit trust portfolio online is that you can monitor it at any time, without having to wait for statements to be mailed to you.
You can also view a consolidated statement of all your unit trust holdings which, Equinox says, makes it easier to time buys and sells and possibly reduce your capital gains tax liabilities.
In addition, whether you are an Equinox investor or not, Equinox allows you to access a number of educational articles, the market views of fund managers and economists, and news items on developments in the unit trust industry, such as fund closures or launches or fund manager changes. Regular newsletters can also be emailed to you.