As usual with all things financial, the following is only an opinion and most definitely not advice. It's not intended as a recommendation to do or not do anything in particular: if you want advice or recommendations, find a professional independent financial advisor.
OK, disclaimer over!
The first thing to say is that investing in the stock market in present times is not for the faint-hearted. In a sense it has always been so, but the "short-term-ism" of many people's viewpoints these days often seems to mask the fact that investments in equities (i.e. stocks and shares) are for the long term (a minimum of 5 years, possibly even 10 years). Over this kind of period one can expect to have a much better than average likelihood of making a good return on one's investment. Thus, short-term setbacks and drops in value are only to be expected: they should not be anything surprising. Nonetheless, there are sectors of the market where the risk is not just of poor returns but of actual losses. Over the long term one can perhaps ride these out, but it's vital to remember that the risks are such that one can lose money on equities.
Now, there are two things that one can do to limit these risks and their consequences. The first is to adopt the principle that one should never invest more in these investments than one is prepared to lose. So, something which is far from guaranteed may default and pay out nothing or very little: if you don't put in money which you can't afford to lose, you won't be finanicially crippled, whatever happens.
Second, however, you can diversify, and that is where unit trusts come in. Instead of risking your capital on a small selection of equities (which, let's face it, is as much as most small investors could manage given the costs of share-dealing etc.), you can pool your money with that of hundreds or thousands of others into one large fund. This fund is then run by a professional manager or company such as Nationwide Unit Trust Managers (or NUTM for short). The advantages are that you have the benefits of investing in a whole range of equities but can do so at very limited cost with very small sums of money.
There are a great many such companies and managers out there, so don't take it from this opinion that NUTM is by far the best (nor that it is among the lower end of the scale). That judgement will to a large extent depend on your circumstances.
Now, I'm not, as I said above, going to give an opinion on the quality of the investment strategies adopted by NUTM - I'm not qualified to do so. However, there are some things which you can compare in terms of administration and facilities that I can draw your attention to, if only so that you can weigh up the merits of different trust managers.
Many investors now invest through ISAs. It is worth pointing out, therefore, that NUTM offer both Mini and Maxi stocks and shares ISAs. However, unlike some other companies, they do not offer a cash component within the Maxi ISA. This may influence your choice. [It is actually surprising that they don't offer this, given that the overall Nationwide organisation does offer a Mini cash ISA: one might have thought that there was a way of overlapping here, even if the subsidiaries are quite distinct!]
The range of funds available through NUTM is four: Balanced Growth, UK Growth, Tracker and High Income. These all have different charging structures and different strategies. They can, however, be mixed and matched under the ISA umbrella for any individual tax years. [Note that only the Tracker and High Income funds are available as initial investments, though you can move into the others once your account is up and running.]
The minimum and maximum investment limits are worthy of note, simply because they are higher than those of some other companies. The minimum lump sum investment (whether initially, or as a top-up) is £500, while the monthly minimum direct debit contribution is £50. Consequently, you may find that you have to have at least that much in each of the funds in which you intend to invest.
My final observation is that the process of running an investment with NUTM is very simple: application forms are available in all Nationwide branches and transactions are carried out by post. Units are bought and sold on the day on which your instructions are received; in my experience the service is extremely efficient, and setting up direct debits etc. is made perfectly simple. Similarly reinvestment of income etc. is all handled unproblematically.
The only quibble one might have with NUTM on administrative grounds is that it can be a challenge to find out how much your investments are worth if you want to track them on a more regular basis than your half-yearly statement. Prices are available in the FT and the Daily Telegraph, but obviously not everyone reads these papers. As a result it can be quite hard to keep check: in fact, you may think it wise not to do so too often, given my remarks about the long-term nature of equity investments. Nonetheless, I have discovered that these funds are listed on the FT website (www.ft.com), so you can check up on them there.
In summary, NUTM is a fairly average set-up. The service is good, the charges are at present within standard levels and the range of possibilities is acceptable. Administration is efficient and easy. Nonetheless, shopping around may find that another organisation is appropriate to your needs; but as a Ciao reader, I'm sure you'll enjoy doing the (re)searching.
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