Benefits of Investment Trusts
Investment trusts are collective investments that pool money together to invest in stock markets. Unlike other forms of collective investment, they are listed on the London Stock Exchange and can be traded throughout any dealing day. Here are several other key benefits:
- Investments designed to last…
As one of the oldest existing forms of collective investment, investment trusts have proved their longevity and flexibility. Indeed, they have been providing private investors with a cost effective route to the potential benefits of the stock market for more than 130 years. Investment trusts are companies listed on the London Stock Exchange that invest in the shares of other companies. Like other companies listed on the Stock Exchange, their share price is determined by supply and demand, and can also trade above (at a premium to) or below (at a discount to) the underlying value of the investments held by the trust. This ‘underlying value’ is known as the net asset value. - Independence
Each investment trust benefits from the expertise and resources of a professional fund manager such as RCM, yet, as a company listed on the London Stock Exchange, it is independent and is overseen by its own Board of Directors. The fund manager is accountable to the directors of the investment trust, who are themselves, in turn, accountable to the shareholders. - Income reserves
Investment trusts have the ability to keep reserves of income, so even if dividends are cut by the companies that the trust invests in, some trusts have the potential to continue to sustain their own dividends by using their income reserves. - Gearing
Investment trusts can also benefit from gearing – the ability to borrow money with the aim of enhancing returns. The level of gearing is carefully managed by the trust’s Board of Directors and is determined by, amongst other factors, stock market views. Gearing can boost a trust’s returns when investments perform well, though losses can be magnified when investments lose value. - Easy to purchase
You can easily purchase shares in our investment trusts through a stockbroker, and these can be held in an ISA and/or savings scheme.
