Basic features of Investment Trusts.
Investment Trusts are public limited companies quoted and traded on the stock exchange and investing in areas of investment such as UK Growth, Far East, Emerging Markets and Special Situations.
A management team select stocks for the trust and continually buy and sell shares according to the theme of the investment trust and its mission and market conditions.
Shares in Investment Trust are traded on the stockmarket and private investors can buy shares in the Investment Trust as you would for individual shares.
The Investment Trust enable you to spread risk by investing, through the trust, in the numerous companies whilst benefiting from the experienced management team who continually monitor, buy and sell shares accordingly.
When buying shares in an investment trust company you become a shareholder and your shares will rise and fall in value according to supply and demand for the shares.
Investment Trusts costs.
You may hold shares in as many different investment trusts as you like. Charges include the brokers deal cost plus there is a bid/offer spread of around 5% for buying and selling shares. There is also usually a management charge of between 0.3% and 0.5% per annum.
Investment Trusts vs Unit Trusts
- The overall charges of an investment trust are generally cheaper than a unit trust.
- These are intended as a medium to long term investment.
- You are not certain to make a profit, you may lose money / make a loss.
- Level and bases of and reliefs from taxation are subject to change.
Investment Trusts taxation.
The investor is taxed as for any other share. Dividends are received with a tax credit of 10%. Non-taxpayers cannot reclaim this tax. Lower rate and basic rate tax payers have no further liability. Higher rate taxpayers are liable to a further 22.5% on the grossed up dividend.
It is worth remembering that there is no capital gains tax or income tax to pay for any shares, funds or trusts that are held in a stocks & shares ISA. Most investment trusts qualify for stocks & shares ISA and ISA account are available to be opened and managed online. More below.
What are the benefits of investment trusts?
Your money is pooled with other investors money, reducing costs and increasing investment opportunities plus you have the benefit of an experienced management team.
- The risk is spread because you are investing in a wide range of shares.
- Managers. expertise means your money is invested effectively.
- The charges are low so more of your money starts working from the moment you invest.
You can invest small amounts from as little as £25 a month or lump sums of £250. Combine the benefits of investment trusts and ISAs and you have an effective and tax-efficient way to invest in the stockmarket.
Investment trusts and ISA's
You can hold investment trusts in a self select ISA, subject to the general ISA rules for qualifying share investments.
You may take out a stocks and shares ISA online and invest in funds, unit trusts, investment trusts, stocks and shares as well as bonds and some lower right insurance products.
Many investment trusts allow regular monthly savings from as little as £25, whereas many unit trusts set a minimum £50 for regular contributions, often rising to £250 on many popular funds.
There is no capital gains or income tax to be paid on returns on any shares or trusts held within an ISA.
Stock Market Risk
Stock markets are volatile and risk and reward are linked. In general terms, the higher the potential for growth, the higher the risk and stocks and stock markets do not always rise..
If investment in a building society deposit account can be described as low risk, then investments in unit trusts can range from low to medium risk in the case of most gilt funds, to medium risk for most UK growth and income funds, through to high risk for specialist funds.
Trading Investment trusts Online
You can open an online stocks & shares ISA or just a shares dealing account in ten minutes with TD Direct Investing. TD Direct Investing provide a market leading online share trading account and online stocks & shares ISA backed up by latest market news, trading tools and online support. Links Below.