An Investment Trust is essentially a company that invests in shares and bonds of other companies. Individual investors can purchase shares in the investment company (or investment trust) who use the income generated from selling their shares to invest in other companies. Depending on these investments the share value of the investment trust can either go up or down, but will usually go up in the long run.
There are a number of advantages of using investment trusts as opposed to other investment options. One of the key advantages is the expertise of the investment managers. Their job is to choose the best investments on behalf of their shareholders; in other words those who they are investing on behalf of. They will be experienced investors who understand the markets they are investing in. Therefore utilising investment trusts is a wise idea if you want to invest but are not confident in deciding where to invest yourself. They do charge a fee and take a cut but if this leads to a better investment then it is worth it.
Investment Trusts allow small investors to invest where they may not be able to otherwise. They may not have the funds available to buy shares alone, but in an investment trust the money of different investors is combined to result in larger investments. This is beneficial to those who are not investing enough to accrue significant returns if investing alone as the combined amount increases the total.
Investment trusts will spread investments around different assets. This has two benefits for investors; it spreads the risk and adds to the diversity of the investment portfolio. This means investors are investing in a range of assets. This might not be possible if investing alone, especially if they do not have a large amount that they are able to invest. The range of expertise amongst investment managers means that they are able to invest in this range of different investments.
There are many people who would like to invest but do not have the time to research the best investments. With investment managers using their knowledge and making the investments this is less of an issue with investment trusts.
For many investment trusts are a good alternative to investing in company shares as individuals. The combination of the expertise and experience of investment managers, and the fact that there are several people investing together means that many choose this option above others.
Andrew Marshall (c)
An Investment Trust is essentially a company that invests in shares and bonds of other companies. Individual investors can purchase shares in the investment company (or investment trust) who use the income generated from selling their shares to invest in other companies. There are a number of advantages of using investment trusts as opposed to other investment options.
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