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Investment Trusts: How to pick a good one

23 Jan, 2025

Key Facts

  • Total Assets: £267bn
  • First Trust Established: 1868
  • Unique Feature: Can smooth and reserve dividends
  • Investment Sectors: Global equities, property, infrastructure, smaller companies

What Are Investment Trusts?

Investment trusts are listed companies that invest in other companies, offering a unique approach to building a diversified investment portfolio. Unlike standard funds, they provide distinctive advantages like income smoothing and the ability to use gearing to potentially boost returns.

Core Advantages

  1. Diversification: Access multiple companies through a single investment
  2. Dividend Flexibility: Can reserve up to 15% of dividends for lean years
  3. Active Management: Professional managers selecting investments
  4. Potential for Consistent Income: Some trusts have 50+ years of growing dividends

Beginner-Friendly Options

Top recommended starting investment trusts:

  • Henderson International Income
  • Alliance Witan
  • Scottish American
  • F&C Investment Trust

Key Differences from Index Trackers

  • Index Tracker: Passive, tracks market average
  • Investment Trust: Active management, strategic stock selection
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✓ Detailed trust performance analysis ✓ Comprehensive dividend strategy guide ✓ Expert trust selection criteria ✓ Risk management techniques ✓ Comparative trust performance tools ✓ Income investment strategies

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