1.1 What is an investment trust and how does it work?
An investment trust is very simple. It holds the shares of lots of different companies and assets. By spreading investors’ money across many holdings, it aims to reduce risk and the volatility.
A range of opportunities
Investment trusts offer an alternative to investing directly in individual company shares or other assets.They could be a good alternation to savings accounts for protection against inflation.
They also give investors the opportunity to hold a range of different shares and assets.
Moreover, they are generally cheaper and easier to buy than picking individual shares through a broker.
An investment trust can diversify across many different companies. That would generally be difficult for an individual on his own unless he has a significant amount of capital.
An investment trust has a fixed number of shares. The fund manager can invest and sell assets when they feel the time is right; not when investors join or leave a fund. It also means the underlying capital investment base is relatively stable.
Features of investment trusts
Each trust has a fixed number of shares and these shares are traded on the stock market in the same way as are a company’s shares. Their value can go up as well as down. They will also pay a dividend, although it is not guaranteed.
When you invest in an investment trust, you become a shareholder in that company. You can vote on issues such as the appointment of directors or changes to the investment policy.
The potential to grow
Investment trusts can borrow money (known as gearing) to take advantage of investment opportunities.
Borrowing can increase the returns for shareholders, but if the assets fall in value, it can also increase the potential for losses.
Growth, income or both
Different investment trusts have different aims and operate in different sectors.
If you are investing for income, there are trusts with a specific remit to generate income.
Alternatively, you may be looking for a mixture of growth and income. You could select these trusts while receiving a regular pay-out in the form of income.
If you don’t need income, you could opt for a growth trust.
Whatever your needs, we have an investment trust to suit them.
Please read this important information
Investment is subject to documentation. The Investor Disclosure Document, and Key Features / Terms & Conditions can be obtained free of charge from JPMorgan Asset Management (UK) Limited, and the Key Information Document can be obtained from JPMorgan Funds Limited or www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.