Investment trusts are a really unique way to invest, and here in the UK, we’re lucky to have access to a range of options. The only downside is that you might end up feeling like a kid in a sweet shop who doesn’t know what to choose!
So, I’m going to reveal the most popular funds in the UK last month along with some tips to help you make the most of your investments.
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What should you know about investment trusts?
In case you need a quick refresher on this type of investment, here are the basics you need to know:
- Investment trusts are basically set up as companies that you can buy shares in.
- The structure is ‘close-end’, so there’s a fixed number of shares and you don’t have to worry about people pulling money out of the fund.
- It’s common for these funds to trade above or below the net asset value (NAV), which then results in a discount or a premium.
- Often, investment trusts will focus on specific areas, themes or objectives.
- Trusts can invest in private equity not available to the public.
- Annual management fees and other admin costs usually apply.
What were the most popular investment trusts in the UK last month?
According to Interactive Investor, these were the most-bought funds in the UK during October:
|Position||Trust name||Sector||Year performance to 1 November 2021|
|2||City of London||UK Equity Income||31.7%|
|3||Edinburgh Worldwide||Global Smaller Companies||9.4%|
|4||HarbourVest Global Private||Private Equity||43.4%|
|5||Capital Gearing||Flexible Investment||14.3%|
|6||Smithson||Global Smaller Companies||27.1%|
|7||BlackRock World Mining||Commodities and Natural Resources||47.8%|
|9||Pacific Horizon||Asia Pacific||41.6%|
|10||Personal Assets||IT Flexible Investment||12.4%|
Does this tell us anything interesting about UK investors?
There’s quite a diverse range of trusts in the top ten. So it’s good to see that UK investors have a range of tastes when it comes to investing.
One of the great things about investment trusts is that you can own a bunch of them. This means there’s no need to only limit yourself to one. Most investors will pick a handful of different investment trusts that focus on different things.
So this is why there’s so much variety in the top ten. Because investment trusts compete with each other for your money, it also makes sense for them to try and differentiate themselves from the competition.
If all of the funds focused on the same area, they’d be forcing investors like you to choose between one or the other. A variety of focus areas means you can hold various funds in your portfolio, like a big bag of pick ‘n’ mix.
How should you decide which investment trusts to buy?
Here are five key questions you should consider to help you decide:
- What are your goals and strategy? Make sure you have a clear understanding of your own investing strategy before you consider lumping money into funds.
- Are you looking for growth or income? It’s always a good idea to start by deciding whether you want to focus on growing your capital or aim for income from dividends.
- What’s your style? Many of the top trusts are unique. Some will have a heavy interest in tech shares whereas the bread and butter of others will be value investing.
- How has the trust performed in the past? Check out who runs the fund and what their track record is like. Past performance doesn’t dictate future results, but it’s always smart to consider a fund’s history as part of your research when snooping around.
- What are the costs? Sometimes you get what you pay for and cheap isn’t always best. But you should always consider if the costs are reasonable.
How do you put money into an investment trust?
If you’ve decided an investment trust is right for you, most top-rated share dealing accounts will give you access to the many choices we have here in the UK.
In order to maximise your gains, it’s also worth using an account such as the Interactive Investor stocks and shares ISA to buy and hold your investment trust. This is because any gains made through growth or dividends won’t be subject to tax.
Investing using these funds can be a great way to get expert management and a diverse range of investments. But always remember there are no guarantees and you may get out less than you put in.