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  • FIRST POST
    • Nocto
    • By Nocto 11th Mar 17, 6:12 PM
    • 171Posts
    • 145Thanks
    Nocto
    Considering Investment Trust investment
    • #1
    • 11th Mar 17, 6:12 PM
    Considering Investment Trust investment 11th Mar 17 at 6:12 PM
    I am an income investor with a portfolio of Unit Trusts (& OEIC’s), and over the next few weeks will be moving some of my investments into an ISA, due to the recent tax changes.

    Rather than buying back units in the same funds (Invesco Perpetual Income Inc & IP High Income Inc), I am considering purchasing shares in a UK Equity Income investment trust. The intention being to split two roughly equal investments into three.

    I will be staying in the UK Equity Income sector - this is not a whole portfolio rebalance.

    I am looking at The City of London Investment Trust plc*. As an income investor its 50 year history of dividend increases is pretty compelling (though of course past performance is not a guide to the future, etc. etc…). It looks to be well and conservatively managed, with good long term growth. Views would be appreciated.

    Also, I have never purchased shares in an investment trust before. I understand and am completely comfortable with the way unit trusts work, but have always been a little wary of investment trust discounts / premiums and gearing. Which is why I have never invested in one before. Again, views would be appreciated.

    Finally, Trustnet lists five share classes. Common sense tells me that “The City of London Investment Trust Ord” (price 418.5p today) is the correct share to purchase (CTY.L), but what are the others?


    * All funds in the IT UK Equity Income sector are under consideration - This one looks to be the most suitable for me. But I am open to other suggestions.



    Can I politely request that this thread doesn’t deteriorate into a Unit Trusts vs Investment Trusts (and possibly ETF’s) argument… Thank you!
Page 2
    • badger09
    • By badger09 12th Mar 17, 11:07 AM
    • 5,112 Posts
    • 4,325 Thanks
    badger09
    I don't think ColdIron said anything about shopping.
    Originally posted by Freecall
    Fair comment
    • greenglide
    • By greenglide 12th Mar 17, 11:43 AM
    • 2,780 Posts
    • 1,771 Thanks
    greenglide
    But do you not actually have to make a purchase now to get the token to put in the coffee machine? I thought they had changed things?
    Last edited by greenglide; 12-03-2017 at 11:43 AM. Reason: typo
    • ColdIron
    • By ColdIron 12th Mar 17, 11:59 AM
    • 3,278 Posts
    • 3,769 Thanks
    ColdIron
    Yes, it was £5 weekdays and £10 weekends I think but now a flat £10 if you want a paper. I think you can get a just coffee in the cafe for any purchase. We have a posh one that gives us cups and not tokens
    • Reaper
    • By Reaper 12th Mar 17, 5:02 PM
    • 6,088 Posts
    • 4,156 Thanks
    Reaper
    No one’s come back with a compelling reason to avoid this IT (or IT’s in general - yet!).
    Originally posted by Nocto
    As long as you understand how Investment Trusts differ from the more common OEICs. Gearing is important as it means the performance may be amplified - so it does better than a comparable OEIC fund when markets are rising but falls faster and further when markets fall.

    I hold them (not least because they count as shares so my fund platform doesn't hit me for the same fees they levy on OEIC funds!) and City of London is indeed one of a number I have invested in.
    • Audaxer
    • By Audaxer 12th Mar 17, 10:27 PM
    • 308 Posts
    • 98 Thanks
    Audaxer
    As long as you understand how Investment Trusts differ from the more common OEICs. Gearing is important as it means the performance may be amplified - so it does better than a comparable OEIC fund when markets are rising but falls faster and further when markets fall.

    I hold them (not least because they count as shares so my fund platform doesn't hit me for the same fees they levy on OEIC funds!) and City of London is indeed one of a number I have invested in.
    Originally posted by Reaper
    I was considering Investment Trusts as well, and also thought from the little I had read that City of London seemed a very good one to start with. Although ITs are more volatile, do they keep a the same dividend levels in falling markets?
    • Nocto
    • By Nocto 12th Mar 17, 11:20 PM
    • 171 Posts
    • 145 Thanks
    Nocto
    Charting City of London on trustnet it doesn’t seem to be much more volatile than my existing UK income funds (maybe a little), but as I’m used to the ups and downs of the market I can live with that.

    I gather that it has raised its dividend every year for the last 50 years, which is very impressive… Though of course no guide to the future, I’d guess that the management are keen not to spoil this record.
    • Reaper
    • By Reaper 13th Mar 17, 9:06 AM
    • 6,088 Posts
    • 4,156 Thanks
    Reaper
    There are 19 investment trusts that have raised dividends every year for over 20 years (list here).

    So if you are after reasonably safe income they may be a good place to start. However remember they achieve this by holding back some profits in the good years to tide them over in the bad ones. That means in growth terms they may lag the market when it is shooting up, but do better when it takes a turn for the worse - so having an opposite effect to gearing!

    As I mentioned before the level of gearing increases volatility. You can find out how much gearing an IT uses by looking them up on www.theaic.co.uk and then click on the "Charges and Gearing" tab. To understand the effect of gearing on performance see this page:
    http://www.theaic.co.uk/aic/glossary/G?item=997
    • Sally57
    • By Sally57 13th Mar 17, 11:31 AM
    • 72 Posts
    • 15 Thanks
    Sally57
    Investment Trusts holdings seem much more popular now. Although they differ from OEIC's, as long as people know how they work then why not invest in an investment trust whether UK or Global in tandem with OEIC funds.

    As an example my husband holds Finsbury Income & Growth as well as CF Lindsell Train for the UK part of his investment portfolio and Scottish Mortgage and Old Mutual Global Equity for the global element.
    • David Aston
    • By David Aston 13th Mar 17, 1:34 PM
    • 627 Posts
    • 403 Thanks
    David Aston
    F&C products have performed pretty well for the Missus over twenty plus years. As I have said elsewhere, Fidelity European Values were sensational for their first fifteen years of life, at least. Perp. Investment and growth has plodded along steadily since it's launch, as well.
    • Sue58
    • By Sue58 13th Mar 17, 3:14 PM
    • 67 Posts
    • 10 Thanks
    Sue58
    As an example my husband holds Finsbury Income & Growth as well as CF Lindsell Train for the UK part of his investment portfolio and Scottish Mortgage and Old Mutual Global Equity for the global element.
    Originally posted by Sally57
    Gosh they've all done incredibly well! I've just looked on Trustnet at last 5 year performance!

    CF Lindsell Train 119.7 - Finsbury 125.2 (both managed by Nick Train)

    Old Mutual 153.9 - Scottish Mortgage 174.3
    • StellaN
    • By StellaN 13th Mar 17, 4:01 PM
    • 158 Posts
    • 47 Thanks
    StellaN
    Gosh they've all done incredibly well! I've just looked on Trustnet at last 5 year performance!

    CF Lindsell Train 119.7 - Finsbury 125.2 (both managed by Nick Train)

    Old Mutual 153.9 - Scottish Mortgage 174.3
    Originally posted by Sue58
    Yes, they are incredible figures but will they continue to perform well in the future?

    I suppose, at least with such a well experienced fund manager like Nick Train then the UK fund/trust certainly has a great chance of continued success in performance!
    • Sally57
    • By Sally57 13th Mar 17, 5:54 PM
    • 72 Posts
    • 15 Thanks
    Sally57
    Yes, they are incredible figures but will they continue to perform well in the future?

    I suppose, at least with such a well experienced fund manager like Nick Train then the UK fund/trust certainly has a great chance of continued success in performance!
    Originally posted by StellaN
    He's been delighted with these investments, however before he invested in these funds/trusts he was advised by his previous financial advisor that he shouldn't really hold a fund and trust in the same sector which fortunately he ignored and is very happy with the results so far!
    • bowlhead99
    • By bowlhead99 13th Mar 17, 6:55 PM
    • 6,581 Posts
    • 11,642 Thanks
    bowlhead99
    however before he invested in these funds/trusts he was advised by his previous financial advisor that he shouldn't really hold a fund and trust in the same sector which fortunately he ignored and is very happy with the results so far!
    Originally posted by Sally57
    The advice was sensible though. If he had put all the money that he ended up splitting between LT and Finsbury into one or the other, he would have either got 125% or 120% return on all the money, instead of the blended average of 122.5%. Similarly in the global sector if he'd flipped a coin on the two investments you mentioned he'd have either 174 or 154, neither of which are very far removed from the average of the two which he actually got of 164.

    So, seems little grounds for saying you're glad he ignored the advice to not bother with lots and lots of products covering the same area.

    A couple of things in the same sector is fine. Maybe even three if you want to hedge your bets and are unsure between managers and styles. But to buy two IT's/funds with big overlap which delivered very similar returns and then be really glad you ignored the advice to not bother with overlapping funds/ITs, doesn't make a whole lot of sense.
    • StellaN
    • By StellaN 13th Mar 17, 8:14 PM
    • 158 Posts
    • 47 Thanks
    StellaN
    The advice was sensible though. If he had put all the money that he ended up splitting between LT and Finsbury into one or the other, he would have either got 125% or 120% return on all the money, instead of the blended average of 122.5%. Similarly in the global sector if he'd flipped a coin on the two investments you mentioned he'd have either 174 or 154, neither of which are very far removed from the average of the two which he actually got of 164.

    So, seems little grounds for saying you're glad he ignored the advice to not bother with lots and lots of products covering the same area.

    A couple of things in the same sector is fine. Maybe even three if you want to hedge your bets and are unsure between managers and styles. But to buy two IT's/funds with big overlap which delivered very similar returns and then be really glad you ignored the advice to not bother with overlapping funds/ITs, doesn't make a whole lot of sense.
    Originally posted by bowlhead99
    I can understand the overlap on the UK IT/ Fund managed by Nick Train because he invests mainly in the same companies for both.

    However, does the Old Mutual Global Equity overlap Scottish Mortgage in the same way?
    • bowlhead99
    • By bowlhead99 13th Mar 17, 9:05 PM
    • 6,581 Posts
    • 11,642 Thanks
    bowlhead99
    I can understand the overlap on the UK IT/ Fund managed by Nick Train because he invests mainly in the same companies for both.

    However, does the Old Mutual Global Equity overlap Scottish Mortgage in the same way?
    Originally posted by StellaN
    I haven't looked though I doubt it because SMT's holdings are pretty concentrated and specialist while Old Mutual have 500 holdings. Both have Google in the top ten for example but they have quite different strategies.

    The advisor's point was simply, you don't need to hold an IT *and* and an open ended fund in the same sector - especially two managed by the same manager in the same sector with the same objective. Just like if ITs didn't exist, you wouldn't need two similar open ended funds in the same sector either.

    If you are holding something very specialist and conviction-driven like SMT, you probably do also want something more 'mellow' in your 'global generalist equities' sector, IMHO - assuming you aren't already using regional funds instead of global generalists.
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