Investment Trusts aren't limited to comprising of stocks and shares in companies. In fact, they can be made up of lots of different assets, such as bonds or property. Trusts can even involve a combination of several asset types. This makes them a valuable tool for investors looking
to diversify their portfolio by spreading their investment across different areas and gaining access to assets which do not usually trade frequently, such as property,
without having to manage a complicated basket of singular investments by themselves. Plus, the fund manager does all the number-crunching on behalf of the shareholders, so they don't have to pour over the figures to work out what's working for them and what isn't.
Can borrow or 'gear'
Unlike other collective funds, such as unit trusts, Investment Trusts have the ability to borrow money. For example, say there is an Investment Trust which wants to incorporate Tesla shares but does not have enough capital to purchase them outright.
The fund manager would be able to borrow money from a bank in order to purchase Tesla shares without having to raise the cash first.
Now the Trust has Tesla shares as part of its portfolio, but it owes money to the bank for lending it the cash to do so. Ideally, taking on Tesla shares would generate a profit for the Trust (assuming Tesla itself performs well) and the Trust can then use this capital to repay the loan it took from the bank.
It's not all stocks and shares
Investment Trusts aren't limited to comprising of stocks and shares in companies. In fact, they can be made up of lots of different assets, such as bonds or property. Trusts can even involve a combination of several asset types. This makes them a valuable tool for investors looking to diversify their portfolio by spreading their investment across different areas and gaining access to assets which do not usually trade frequently, such as property,
without having to manage a complicated basket of singular investments by themselves. Plus, the fund manager does all the number-crunching on behalf of the shareholders, so they don't have to pour over the figures to work out what's working for them and what isn't.
Top 15 best investment options
Unlike other collective funds, such as unit trusts, Investment Trusts have the ability to borrow money. For example, say there is an Investment Trust which wants to incorporate Tesla shares but does not have enough capital to purchase them outright. The fund manager would be able to borrow money from a bank in order to purchase Tesla shares without having to raise the cash first.
Now the Trust has Tesla shares as part of its portfolio, but it owes money to the bank for lending it the cash to do so. Ideally, taking on Tesla shares would generate a profit for the Trust (assuming Tesla itself performs well) and the Trust can then use this capital to repay the loan it took from the bank.
It's not all stocks and shares
Investment Trusts aren't limited to comprising of stocks and shares in companies. In fact, they can be made up of lots of different assets, such as bonds or property. Trusts can even involve a combination of several asset types.
This makes them a valuable tool for investors looking to diversify their portfolio by spreading their investment across different areas and gaining access to assets which do not usually trade frequently, such as property,
without having to manage a complicated basket of singular investments by themselves. Plus, the fund manager does all the number-crunching on behalf of the shareholders, so they don't have to pour over the figures to work out what's working for them and what isn't.
That, of course, depends on you – how much risk you want to take, how long you have to invest, how much cash you have. If you have no firm idea about where you want to invest, there are lots of generalist investment trusts that invest across the world, giving you a bit in - among others - the US, China, Europe and Japan. These are the oldest, largest and best-established trusts, including Witan, Scottish Mortgage, or Foreign & Colonial.
If you have a particular region in mind, you could home in on that, but you will still need to decide the type of investment you’re looking for. Do you prefer higher octane smaller companies, for example, which give you high potential rewards but at higher risk? Or would you prefer an investment that pays a steady income?
Investment trusts also offer a way to invest in more unusual areas. There are an increasing range of trusts investing in areas such as renewable energy, care homes, or student accommodation. These can provide an interesting alternative to mainstream investments and, potentially, another source of income.
That, of course, depends on you – how much risk you want to take, how long you have to invest, how much cash you have. If you have no firm idea about where you want to invest, there are lots of generalist investment trusts that invest across the world, giving you a bit in - among others - the US, China, Europe and Japan. These are the oldest, largest and best-established trusts, including Witan, Scottish Mortgage, or Foreign & Colonial.
If you have a particular region in mind, you could home in on that, but you will still need to decide the type of investment you’re looking for. Do you prefer higher octane smaller companies, for example, which give you high potential rewards but at higher risk? Or would you prefer an investment that pays a steady income?
Investment trusts also offer a way to invest in more unusual areas. There are an increasing range of trusts investing in areas such as renewable energy, care homes, or student accommodation. These can provide an interesting alternative to mainstream investments and, potentially, another source of income.
That, of course, depends on you – how much risk you want to take, how long you have to invest, how much cash you have. If you have no firm idea about where you want to invest, there are lots of generalist investment trusts that invest across the world, giving you a bit in - among others - the US, China, Europe and Japan. These are the oldest, largest and best-established trusts, including Witan, Scottish Mortgage, or Foreign & Colonial.
If you have a particular region in mind, you could home in on that, but you will still need to decide the type of investment you’re looking for. Do you prefer higher octane smaller companies, for example, which give you high potential rewards but at higher risk? Or would you prefer an investment that pays a steady income?
Investment trusts also offer a way to invest in more unusual areas. There are an increasing range of trusts investing in areas such as renewable energy, care homes, or student accommodation. These can provide an interesting alternative to mainstream investments and, potentially, another source of income.
That, of course, depends on you – how much risk you want to take, how long you have to invest, how much cash you have. If you have no firm idea about where you want to invest, there are lots of generalist investment trusts that invest across the world, giving you a bit in - among others - the US, China, Europe and Japan. These are the oldest, largest and best-established trusts, including Witan, Scottish Mortgage, or Foreign & Colonial.
If you have a particular region in mind, you could home in on that, but you will still need to decide the type of investment you’re looking for. Do you prefer higher octane smaller companies, for example, which give you high potential rewards but at higher risk? Or would you prefer an investment that pays a steady income?
Investment trusts also offer a way to invest in more unusual areas. There are an increasing range of trusts investing in areas such as renewable energy, care homes, or student accommodation. These can provide an interesting alternative to mainstream investments and, potentially, another source of income.
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