Independent financial advice - investment trusts
If you are taking independent financial advice with a view to placing your money in an investment trust, read on.
What are investment trusts?
An investment trust is a company whose line of business is investing in other companies. The investment trust company has shares and is quoted on the stock market. Following independent financial advice you take a stake in its fund by buying the shares of the company. It is a 'close-ended fund' because there are a set number of shares and this number does not change regardless of the number of investors.
The price of shares
The price of the shares reflects the value of the investments in the fund, but is affected by other factors too. If there are more people wanting to sell their shares than people wanting to buy, the share price tends to fall. If there are more buyers than sellers, the share price tends to rise. The company can borrow money and use it to buy more investments - this boosts the company's returns when the investments perform well but magnifies losses if investments do badly. Independent financial advice can explain this more fully.
Charges
Investment trusts often issue different types ('classes') of shares to suit different types of investor. Some suit investors seeking income, others suit investors wanting growth. You usually pay dealing charges when you buy and sell investment trust shares and the difference between the prices at which you can buy and sell (the 'spread') is in effect another charge. There is also a yearly management fee which comes out of the investment fund. You can save on a regular monthly basis through the investment trust company or invest a lump sum. Take independent financial advice for either option.
Saving for your children
Saving for children ideally means putting money away for ten, or even twenty, years. Over such a long period it is vitally important to go for a low-cost option, because performance can never be guaranteed whereas costs are inevitable and can eat deeply into the value of the assets over the years. Make sure you get good independent financial advice when investing in your child's future. On the costs and charges front, investment trusts are almost always a lot less expensive than their unitised equivalents.
As for ensuring that investors' interests are always paramount, investment trusts are hugely advantaged in having independent boards of directors. Their duties range from objecting to any unjustified increases in fees, to keeping a close eye on the manager. Investors in unitised trusts have no such independent champion so bear this fact in mind when taking independent financial advice.
You can have a brighter financial future. If you would like independent financial advice about investment trusts call our experienced advisers today on 01424 777 156 or e-mail mike.robertson@mraltd.com
