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Investment Trust Guide

 

Intro

An investment trust can be one of the most efficient ways to invest in the stock market. This guide explains simply what investment trusts are, how they work and what they can be used for.

What is an investment trust?
An investment trust is a type of collective vehicle, investing in a portfolio of shares and securities.

It is a listed company with shares quoted on the London Stock Exchange, which invests in the shares of other companies or in fixed-interest securities, unquoted securities or property. An investment trust has an independent board of directors who are responsible for looking after shareholders' interests.

As a quoted company, the share price of an investment trust is determined by the supply and demand for its shares on the stock market.

An investment trust works by pooling together investors’ money and delegating responsibility to a professional fund manager to invest in the stocks and shares of a wide range of companies, supplemented by other securities. This enables individuals with relatively small amounts of money to gain exposure to a diversified and expertly managed portfolio of investments.

The first Investment Trust, Foreign & Colonial, was launched in London in 1868 to invest in foreign government bonds or fixed interest stocks. Since then investment trusts have been involved in some of the most significant industrial trends and investment opportunities over the last 150 years. As at 30 June 2009, there are over 430 investment trusts with £75 billion under management (Source: Association of Investment Companies).

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