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Answers to YOUR Questions

See what's bugging others. 

And what our experts say.

Investments | Funds | Shares

Are you able to comment on The Investment Company? I wanted an investment trust with an income, so I put £10,000 in there. It does deliver a reliable quarterly dividend but the capital value has dropped by 10% since I invested 2 years ago. Can you comment on its performance? I was considering selling it and moving the money to another fund with a similar return but a better performance. If you could tell me your favourite investment trusts at the moment that would be great.

Fran, Greater London

08 August 2018

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Mark Dampier

The Investment Company is a tiny trust at £17m. At this size I find it hard to believe it can be a going concern.

The original fund manager was a small cap specialist and a good one at that - so I am unclear why he was sacked. The management has gone to a London based broker, Friske, who I don’t know.

UK income funds have generally struggled over the last 2 years, and the market has been in love with tech type stocks. They've tended to shun traditional income funds who look for companies with a market type yield (around 3.8%), which will grow over the years. I have no idea whether Friske have any expertise in running funds.

Looking for alternative bigger, more established names - I would look at Edinburgh Trust, which is currently on a near 10% discount*.

It’s had a difficult time recently, but the fund manager has an excellent long term record. (I have bought some myself).

I would also add Standard Life Equity Income which has performed better and is therefore only on a 1% discount. (I have bought this too!)

I think the two funds complement each other. Edinburgh pays quarterly dividends while Standard Life is twice a year.

 

Holly adds

“If you have a collection of funds or investment trusts, you need to set up an account somewhere to buy them. Most people use an investment platform. Our Best Buys tables will show you which ones we like, and let you filter your search according to what you want.”

 

 

Jargon buster:

Yield -

Some companies (and shares) generate spare and excess cash which they choose to ‘divvy up’ and pay out to shareholders. As dividends.

This means that some investments can generate an annual income as well as hopefully going up in value.  For example, if a £100 investment pays out £3 a year, it is said to have a yield of 3%.

 

*Discount -

Investment trusts are slightly weird creatures – they are companies themselves and their business is buying and selling shares. So let’s say I set up Holly Trust PLC. I buy Apple, British Airways and HSBC. Their shares are £100 each. So the trust has £300 in it. 300 people buy shares at £1 each. Now imagine a month later the shares haven’t moved in price. All of the shares I have are still £100 each. A few people are fed up because they think Holly Trust PLC is rubbish. So they sell out. This pushes the shares in Holly Trust PLC down to 90p. So you have this weird situation where the total value of the shares in Holly PLC is actually less than the value of the shares that Holly PLC owns. This is trading at a discount. The opposite is when everyone loves it and the investment trust is worth more than all its underlying holdings – then this is trading at a ‘premium’.

 

 

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

Investments | Shares

Should I be even thinking about the stock market?

Lysa, Greater London

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Holly Mackay

It really depends. Have a go at the following questions:

– Do you have savings that you can draw on in an emergency?

– Are you on the housing ladder OR not saving for a house?

– Do you have a stable job where you can afford to put money into a regular investment or savings plan each month?

– Do you have a certain amount of money left over at the end of the month that you can set aside for the long-term?

If all your answers are ‘yes’ than you should seriously consider investing in the stock market. It sounds scary but your money is probably going to grow more impressively in the long-term if it is invested in a well-balanced, diversified portfolio compared to a bog standard savings account, where interest rates have been rubbish for some time now.

The stock market has time to ride out the peaks and troughs of the stock-market so if you stick in there for at least five years, you have a reasonably good chance of cultivating decent returns.

One thing to bear in mind; there are no guarantees when investing in the stock market. You’re never absolutely 100 per cent certain that you will get back what you put in. You’re taking a risk by investing in the prospects of companies, markets and entire regions; here at Boring Money, we would argue that you have to be in to it win it over the long-term but it’s your call entirely.

If the answers to the questions above are ‘no’, then you should probably concentrate on either building up emergency savings in a decent savings or current account, finessing your credit rating or possibly saving into a cash-based Help to Buy ISA to get ‘free money’ from the government. Additionally, if these savings are to fund a goal over the next 2-3 years then the stock market is not such a great idea. If things fall off a cliff, you do NOT want to be a forced seller in down turns. That’s how you lose money.

 

 

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

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