Investing in unit trust funds (also known as mutual funds in some countries) is one of the easiest ways to grow your money without directly buying shares or managing portfolios yourself.
But sometimes, after investing for months or years, you might look at your statement and wonder:
“Why are my returns so low?”
This question is common among investors in Nigeria, Kenya, Ghana, Uganda, and South Africa.
While unit trust funds are designed to be relatively stable and beginner-friendly, several factors can cause them to deliver lower-than-expected returns.
The good news is — low returns can be fixed.
In this guide, we’ll explain in simple, clear English why your unit trust returns may be low and what you can practically do to improve them.
Whether you’re a student saving your allowance or a working-class citizen trying to build wealth, this article will help you understand how to make your unit trust fund work harder for you.
What Are Unit Trust Funds?
Before we talk about fixing low returns, let’s first understand what unit trust funds are and how they work.
Definition of Unit Trust Fund
A unit trust fund is an investment that pools money from many investors and invests it in a variety of assets such as:
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Company shares (stocks)
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Government or corporate bonds
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Treasury bills
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Real estate or commodities
Each investor owns units in the fund, and the value of each unit changes depending on how the underlying investments perform.
How Unit Trust Funds Work (Step-by-Step)
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You invest your money into a unit trust.
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The fund manager combines your money with others’ money.
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They buy investments like stocks or bonds.
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As those investments grow or pay interest, your fund’s value increases.
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You can withdraw profits or leave them to compound.
Understanding “Low Returns” in Unit Trust Funds
What Does “Low Returns” Mean?
Low returns mean that your unit trust fund is not earning as much profit as you expected.
For example:
If you invested ₦100,000 or KSh 50,000, and after one year your return is only ₦2,000 or KSh 1,000 — that’s a 2% return, which is quite low compared to inflation or other investment options.
Why Do Low Returns Happen?
Low returns are not always because your fund is “bad.” They can happen because of:
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Market downturns
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High management fees
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Poor investment strategy
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Inflation
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Wrong fund choice for your goals
Let’s explore these in detail.
Top Reasons for Low Returns from Unit Trust Funds
1. Choosing the Wrong Type of Fund
Unit trust funds come in different types — each with its own risk and return level.
If your goal is high growth, but you invest in a money market fund, your returns will be low.
Common Types of Unit Trust Funds:
| Type of Fund | Risk Level | Average Return (Yearly) | Best For |
|---|---|---|---|
| Money Market Fund | Low | 5% – 10% | Short-term savings |
| Bond Fund | Medium | 8% – 12% | Stable, long-term income |
| Balanced Fund | Medium–High | 10% – 15% | Moderate growth |
| Equity Fund | High | 15% – 25% | Long-term wealth growth |
Example:
If you want to grow your wealth over 5–10 years but put all your money in a Money Market Fund, you’ll get steady but low returns.
2. High Fund Management Fees
Every fund manager charges fees for managing your money — usually between 1% and 3% per year.
If fees are too high, they can reduce your net profit significantly.
For example:
If your fund earns 10% in a year, but the manager charges 3% in fees, your actual gain is only 7%.
3. Poor Fund Management
Sometimes, the fund manager’s investment decisions may not perform well due to market timing errors or bad asset selection.
That’s why it’s important to invest with reputable, licensed, and experienced fund managers.
4. Inflation
Even if your fund earns 7% annually, if inflation is 10%, your real returns are negative.
Inflation quietly eats away your profits, reducing the actual purchasing power of your money.
5. Short Investment Duration
Unit trust funds perform best over time.
If you withdraw after only a few months, you may not see much growth.
The key to higher returns is patience and consistency — letting compound interest work for you.
6. Wrong Expectations
Some beginners expect 30%–50% returns every year.
But unit trust funds are not “get-rich-quick” investments. They are designed for steady, long-term growth, not overnight profits.
7. Economic and Market Conditions
When the economy is struggling (e.g., during inflation, currency devaluation, or political instability), company stocks or bonds may perform poorly — affecting your fund’s return.
However, over time, markets recover, and so do fund values.
How to Fix Low Returns from Unit Trust Funds
Now that you know the causes, let’s look at practical solutions.
These steps will help you improve your investment performance and get better results.
1. Reassess Your Investment Goals
Ask yourself:
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Am I investing short-term (less than 1 year)?
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Or long-term (3–10 years)?
If your goal is long-term growth, you should be in equity or balanced funds rather than money market funds.
Tip: Match your fund type to your goal.
| Goal | Recommended Fund Type |
|---|---|
| Emergency fund | Money Market Fund |
| Retirement plan | Balanced or Equity Fund |
| School fees (short-term) | Bond or Money Market Fund |
| Wealth creation | Equity Fund |
2. Diversify Across Different Funds
Don’t keep all your money in one type of unit trust.
You can spread your investment across different funds to balance safety and growth.
Example Diversification Strategy:
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40% in Money Market Fund (safety)
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30% in Bond Fund (steady returns)
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30% in Equity Fund (growth potential)
This way, if one fund performs poorly, the others can make up for it.
3. Reinvest Your Dividends
Many investors withdraw their returns each year.
Instead, reinvest your dividends to enjoy compound growth.
Example:
₦100,000 earning 10% yearly grows to ₦259,000 in 10 years if reinvested — but only ₦200,000 if withdrawn annually.
4. Choose a More Competitive Fund Manager
If your fund consistently underperforms compared to similar funds, consider switching.
Check the fund’s 5-year performance history, and compare it with competitors in your country.
Example:
In Kenya, if Fund A gives 6% but Fund B gives 12% with similar risk, it’s wise to move to Fund B.
Always verify licenses with your national Securities and Exchange Commission (SEC) or Capital Markets Authority (CMA).
5. Reduce Fees and Hidden Charges
Ask your provider for a clear breakdown of:
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Management fees
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Entry/exit fees
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Administrative charges
Switch to funds with lower expense ratios. Even a 1% difference can significantly improve returns over time.
6. Stay Invested Longer
Markets fluctuate, but over time, they generally go up.
The longer you stay invested, the more you benefit from compounding and market recovery.
Example:
An investor who stayed 10 years in an equity fund earned 150%, while one who left after 1 year earned only 8%.
7. Increase Your Monthly Contributions
Low returns might not always mean poor performance — sometimes, it’s just because your investment amount is too small.
Adding small amounts monthly can multiply your final return.
Example:
₦10,000 monthly for 5 years at 10% = ₦774,000.
₦20,000 monthly for 5 years = ₦1.55 million.
8. Monitor and Review Performance Regularly
Review your unit trust performance at least every 6 months.
Compare returns with:
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Market average
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Inflation rate
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Similar funds from competitors
If your fund constantly underperforms, it’s time to act.
9. Understand Market Trends
Learn basic investment terms like:
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NAV (Net Asset Value) – the price of each unit
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Yield – the return your fund generates
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Volatility – how much the value changes over time
When you understand these, you can make better decisions about when to buy more units or switch funds.
10. Consult a Financial Advisor
If you’re unsure about what to do, talk to a licensed financial advisor.
They’ll analyze your goals, income, and risk appetite to help you restructure your investment portfolio for better returns.
Case Study: Fixing Low Returns in Real Life
Example 1: Amina from Nairobi
Amina invested KSh 100,000 in a Money Market Fund. After a year, she earned only KSh 7,000.
Her goal was long-term wealth, so she switched 50% of her funds into a Balanced Fund.
Three years later, her average annual return rose to 13%.
Lesson: Choosing the right fund type matters more than chasing short-term profits.
Example 2: Chinedu from Nigeria
Chinedu invested ₦200,000 in a Balanced Fund but kept withdrawing dividends.
After three years, his total was ₦260,000.
When he changed to reinvest dividends, the same amount grew to ₦295,000 in two years.
Lesson: Reinvesting dividends accelerates growth.
Example 3: Thando from South Africa
Thando was paying 3% in fund fees. He switched to another fund with 1% fees and similar returns.
His 10-year projection improved by over R120,000!
Lesson: Fees matter — always compare before investing.
Pros and Cons of Unit Trust Funds
| Advantages | Disadvantages |
|---|---|
| Managed by professionals | Returns not guaranteed |
| Diversified portfolio reduces risk | Subject to market changes |
| Easy to start with small money | Management fees apply |
| Highly regulated and transparent | May underperform during recessions |
| Reinvestment allows compounding | Patience required for long-term results |
Summary Table: Fixing Low Returns from Unit Trusts
| Problem | Cause | Solution |
|---|---|---|
| Low returns | Wrong fund type | Match fund to your goal |
| High fees | Hidden management costs | Choose low-fee funds |
| Inflation | Low real value | Invest in high-yield funds |
| Poor performance | Weak fund manager | Switch to better manager |
| Short investment period | Early withdrawal | Stay longer to benefit from compounding |
| Small contributions | Limited growth | Increase monthly investment |
Frequently Asked Questions (FAQs)
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Why is my unit trust giving low returns?
Because of factors like wrong fund type, high fees, or short-term investing. -
How can I increase my unit trust returns?
Reinvest dividends, diversify, and choose higher-performing funds. -
Are unit trusts risky?
They are safer than stocks but still affected by market changes. -
What is the best fund for long-term growth?
Equity or Balanced Funds usually give the best long-term results. -
Can I lose money in a unit trust?
Yes, slightly during market downturns, but losses are often temporary. -
What’s the minimum amount to start?
₦5,000 (Nigeria), KSh 1,000 (Kenya), GH₵ 50 (Ghana), or R100 (South Africa). -
How long should I invest to see good returns?
At least 3–10 years. -
How often should I review my fund?
Every 6 months to 1 year. -
Should I withdraw dividends or reinvest them?
Reinvest for faster compound growth. -
How do I compare different unit trusts?
Look at 3–5 year returns, fees, fund manager reputation, and risk level. -
Can students invest in unit trust funds?
Yes! Many funds allow small contributions perfect for students. -
Are unit trusts better than fixed deposits?
Yes, because they offer higher potential returns over time.
Conclusion
Low returns from your unit trust fund don’t mean you made a bad investment. It simply means it’s time to reassess, adjust, and plan smarter.
The secret to fixing low returns lies in:
Choosing the right fund type
Staying invested longer
Reinvesting dividends
Reducing fees
Diversifying across funds
Remember:
“Good investors don’t chase quick money — they build steady wealth over time.”
If you stay patient, consistent, and informed, your unit trust fund can become one of your most powerful tools for financial freedom.
Call to Action
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