Investment trusts: Every serious investor should have at least one
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Investment trusts are the hidden gems of the financial world and can offer rich pickings to those prepared to persevere with them. Tony Lyons explains why they should be part of every investor's diversified portfolio.
Investment trusts can invest in virtually anything, including private companies whose shares are not listed on any stock exchange and property.
Some are general, investing in a broad portfolio of shares. Others are more specialist, investing in smaller companies, commodities, emerging markets or single countries.
There are a number that are venture capital specialists, funding management buy-outs from large companies or investing in start-up businesses. Split capital funds allow investors to buy shares which will receive either all the income earned by the fund or all the capital growth.
Investment trusts have the ability to raise loans if fund managers feel interest rates are low and they can make a good return on the money borrowed.
Because they are listed on the stock market, most investment trusts can carry higher risks than similar unit trusts as their share prices are determined by investor demand.
If this is low, the share price can be below the trust's net asset value. This is called a discount.
Today the discount averages 11 per cent for investment trusts. This means that an investor can buy pounds 1 worth of assets for 89p.
Many management groups are trying to narrow their discounts, some by buying in shares. If they succeed and discounts narrow, this will lead to a gain even if their net asset values do not change.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments