Investment Trusts are like investing in shares but they are structured like a company with directors, who may employ a fund manager to manage the individual investments within the Investment Trust.
Historically, they are one of the oldest types of ‘collective’ or ‘pooled’ investment with the earliest Investment Trusts going way back to the beginning of the last century.
Unlike Unit Trusts they offer a set amount of shares which means that just like any other shares they are impacted by overall market movements.
What Can An Investment Trust Invest in?
An investment Trust will have ‘stated investment objectives’ and these may mean they are spread globally or narrowly focussed on a smaller market or segment within a market.
Investment Trusts can invest in a wide range of sectors including:
Private equity and venture capital.
A minimum timescale at least five years is preferable and if your timescale is shorter than this it may be best to look at short term alternatives.
Performance of Investment Trusts
An Investment Trust is able to borrow money to invest in shares. This is known as gearing.
The level of gearing impacts risks and returns.
Gearing can either positively enhance gains or negatively diminish them to a far greater degree.
The level of gearing an investment trust allows is a key factor in choosing which investment trust fits with your personal risk appetite.
Through a robust financial planning strategy you should be comfortable with the level of risk your risk exposure.
Taking Income or Reinvesting in Investment Trusts?
Investment Trusts have become a popular way for investors seeking regular income and many offer quarterly payments.
In a low interest rate environment this is very attractive especially if the investment trust is sheltered from tax within an Individual Savings Account (ISA).
If they’re not tax will apply.
In 2020/21 a dividend allowance of £2,000 is available and this is the tax-free amount. Therefore any dividend amounts over this the following tax rates apply:
- a basic rate taxpayer will pay 7.5%;
- a higher rate taxpayer will pay 32.5%;
- and an additional rate taxpayer will pay 38.1%.
Tax rates change (some more than others!) so it’s always worth paying attention to the budget each year.
Investment Trusts within a SIPP Account
Using a SIPP Pension wrapper to hold investments means that up until the age that access is permitted (from age 55 and rising to 57 by 2028) the investments are sheltered from both income tax and capital gains tax.
If a time horizon of 5 years and above is needed then investment trusts can be a useful type of investment. Moreover, with the right level of gearing good performance is achievable.
If you’re new to SIPPs it may be wise to choose a well established manager to begin with.
Investment Trusts publish specification sheets that show who the managers are and their experience.
Investment Trust Charges
- Investment Trust Charges – Annual fee to fund manager for managing fund
- Director and Audit Fees
- Performance Fees (Shown on Key Information Document of Trust)
Investment Trust Providers:
Finsbury Growth and Income Trust
is rug by Nick Train and follows the investment style of Warren Buffet. This trust has performed very well.
Not as high performing as Finsbury Growth but still very good. Significant headwinds from the fall out of Coronavirus may hinder some elements of returns going forwards.
There are many many investment trusts and the key is finding the ones that fit in with your investment philosophy, objectives, time horizon and ethical qualities.
Are Bitcoin ETFs a Good Idea?
A bitcoin exchange-traded fund (ETF) gets exposure to Bitcoin via traditional stock markets, without needing to directly buy or sell the digital...
Do You Have to Pay Taxes on Cryptocurrency?
Do you have to pay taxes on cryptocurrency UK? Yes, you do. If you reside in the UK and hold cryptoassets they will be taxed if you make a profit...
Crypto Young Investor Warning and Regulatory Help from FCA
Will The FCA’s Campaign to Warn ‘Younger Investors’ of Cryptos and other high risk assets work? Possibly, but it may be too little far too late....
Is IRS Reporting Requirement $600 Privacy Invasion?
Is the new $600 dollar US reporting requirement an invasion of privacy. Yes, it is. How else can you look at it? Under the proposals financial...
Crypto Asset Taxation
You’d be foolish to think you’ll escape crypto asset taxation unless you were a very earlier adopter that was set up in a foreign place. But the...
What Happens When Furlough Ends?
What happens when Furlough Ends? The government support scheme called Furlough ends in September 2021. It has provided a lifeline of support for...
Connor McGregor WealthXplosion
It takes tremendous courage to jump into any ring, let alone a cage to fight. It won't be for you if you get claustrophobic or prefer to run rather...
Tax Dodging Landlord
Can You Spot a Tax Dodging Landlord? Depending on which side of the fence you're on you will either support landlords and their tax evasion...
Crypto Asset Regulation – Basel Capital Requirements
At last there's a joined up global initiative following closely on the tax capture of cryptoassets. It's been on the cards for some time, let's be...
Boom Time for UK Borrowers with 40% to Put Down on Property
Boom Time for UK Borrowers with 40% to Put Down on Property!! If you have the cash, maybe stashed away from months of Furlough Freebies then rates...
G Triple 9 or 999?
Have you heard about it? Is it the next big thing? Are you going to miss out? Do you want to get in early? So there I was on an early summer evening...
Marc Anthony Sells Coral Gables Real Estate for $22.4 Million
It's not every day you get a piece of fine coastal property in Florida such as this in the Mediterranean themed community, Coral Gables. In case you...
Buying the Dips in Bitcoin?
There are some legends out there and far more 'scaredy cats.' Scared of risk, scared of losing, scared of being wrong, scared of the unknown, scared...
GoldMan Sachs Bitcoin Trading with Cumberland DRW LCC
It's no secret that by offering and conducting trading in non-deliverable forwards (for speculation) Goldman Sachs are turning to ripe 'money...
Capital Gains Tax on Property
Capital Gains Tax (CGT) is payable on...capital gains – profit after costs. In the US, part of President Biden’s proposal for his American Family...
Are Cryptocurrencies an Investment?
Are Cryptocurrencies an Investment? Do you feel like you've missed out on a once in a lifetime opportunity? Or are you 'sitting pretty' with your...
Educational wealth is plain for all of us to see. The well-educated in any society propel innovation, improve prosperity and make the difference...
Children's health is always important and has become a hot topic post 2020 pandemic time. The coronavirus pandemic has led to significant (and...