Investment Trusts Explained

Getting a good return on your investments can be difficult. To make life easier thousands of investors in the UK put their money into an Investment Trust and leave the share dealing to the experts, here’s what you need to know:

If you are looking to invest for the first time or want the benefit of spreading your money across a host of different companies looking for the best investment trusts on offer in the UK could be a good choice.

What is an Investment Trust?

An investment trust is a type of grouped investment that works by allowing you to deposit you money in a big pot along with a set number of other investors and then handing it to a fund manager to buy shares in a selection of companies.

Investment trust performance results are then dependent on how each of these shares perform on the stock market.

This means an investment trust will tend to be more stable than buying shares in a single company as even if one of the fund’s investments does poorly then there are many others to counter act this loss; equally you are less likely to receive rapid jumps in value.

How to pick the best trust

Getting the best investment trust for you money can make a big difference to the potential returns you’ll get back over the coming years.

Choose the wrong trust and you may find the money you deposit actually loses value or that any profits you do make are swallowed up by hefty account management charges.

Should you invest in the best performing funds 2013?

Do you need to study the growth of last year’s investment funds to be an expert when investing? To a degree, yes, however just looking at the top performing funds and sectors last years does not mean you can predict their growth this year.

Look for an ISA

One of the benefits of choosing an investment trust is that you may be able to invest through an ISA, so any profit your money makes will be tax free.

This is always an option worth investigating as the money you deposit will still be invested in the same areas but you will get to keep all of the money you make.

However, not all investment trusts are available as an ISA so if you are yet to use your allowance then you will need to check you can invest tax free through an investment ISA before you apply.

Check investment limits

Many investment trusts will limit the amount you can deposit, or apply a minimum amount.

Before comparing investment trusts it makes sense to exclude those whose limits or restrictions don’t suit the amount of money you’re looking to invest, be it in a lump sum or as a monthly deposit.

Pick your asset class

One of the most important decisions you’ll need to make when looking for the best investment funds is where you money will be invested.

Investment trusts UK fund managers look after will specify the type of investment portfolio they hold and the areas of the market that they specialise in.

These can vary from property, equity and shares to cash and can have a significant impact on how profitable your investment could be and the level of risk you’re ultimately exposed to.

For more help choosing an area to invest in via and investment trust read our 9 Steps to Finding an Investment Fund That Will Maximise Your Profit .

Check the management fees

To avoid seeing your profits eaten up by fees and charges when comparing investment trust prices you need to check exactly what fees and charges you’ll be expected to pay.

While basing your decision solely on the fees may not be a wise move, as you need to be happy with all areas of your investments, if you are left with several top investment funds to choose from the level of fees could prove to be a deciding factor.

You can compare investment trusts prices and fees side by side using our investment funds comparison table .

For more help deciding if an Investment Trust is the right choice for your finances, read our guide Investment Trusts: A Good Way to Start Your Investment Portfolio?