Investment trusts’ consistency of results have a value to investors, says Russell Taylor in this month’s investment Spotlight.
But, he adds, investors are impatient and fail to do their homework. He points to an angry shareholder of Personal Assets Trust who commented on what the company will do after its “abject performance” compared with the past year’s strong market.
“This shareholder is a perfect example of why far too many people lose their money just as soon as they try to invest it,” he says.
Mr Taylor points to investment trusts, and said they have “significant advantages” over Oeics and exchange-traded funds. Firstly, they do not have to be fully invested in their asset class, however overvalued the managers may consider the market to be. Additionally, as a legal entity, they can create revenue and capital reserves in the good times which allows them to pay dividends in the bad.
He added, “Even on average, a choice of investment trusts is the cheapest way of obtaining high quality investment advice, and one that delivers an adequate income but also sufficient capital growth to allow that income to be supplemented by some capital withdrawal.”