Investment Trusts or Unit Trusts

dunstonh

dougz wrote: »

I am thinking there could be a few hidden risks with an IT in disadvantage to UT:
1) There could be an additional performance risk with ITs that is not immediately apparent where they use the ability to leverage using debt.
2) The IT might wind up at a date inconvenient for you to have to decide what to reinvest it all into next.
3) I have the impression that UTs seem to keep bid/offer prices fairly consistantly close, whereas with ITs the bid/offer prices seem to get unpleasantly wide in certain cases, presumably because liquidity is low, similar to what can happen with less liquid individual shares.
Comments welcome.

When you look at the risk profiles of ITs against a comparable OEIC then it is noticeable that the ITs are typically a couple of notches higher in risk than the OEIC. So, from a risk point of view, you are right that they can affect the decision to invest or use them.

jimjames

You can find out a bit more about specific trusts in this article

http://www.fool.co.uk/news/investing/2010/12/21/another-good-year-for-investment-trusts.aspx

barny_100

I must say I am interested in IT's but have a few unanswered questions. Tried to find answers but not getting the clarity I'd like.

Mainly it's how to buy?

I have a shares ISA with H&L which is excellent for OEIC's but indicates a 0.5% pa charge for IT's as they don't pay trail commission + dealing fees & 0.5% stamp duty when buying and more dealing fees when selling. All that seems to defeat the object of the lower than OIEC fees angle! Am I better setting up a standalone account (With the understanding I'm not using my Capital Gains Allowance elsewhere) somewhere cheaper for IT's? Any tips?

Also are there offerings that allow you to do small regular savers of say £50 per month per trust? I'm reading things saying you can but then no details. I assume it's via the normal method of pooling orders and buying the shares collectively monthly to avoid the prohibitive fees ratio that would come with a £50 share purchase?

Any answers or advice gratefully received!

jimjames

barny_100 wrote: »

I must say I am interested in IT's but have a few unanswered questions. Tried to find answers but not getting the clarity I'd like.

Mainly it's how to buy?

I have a shares ISA with H&L which is excellent for OEIC's but indicates a 0.5% pa charge for IT's as they don't pay trail commission + dealing fees & 0.5% stamp duty when buying and more dealing fees when selling. All that seems to defeat the object of the lower than OIEC fees angle! Am I better setting up a standalone account (With the understanding I'm not using my Capital Gains Allowance elsewhere) somewhere cheaper for IT's? Any tips?

Also are there offerings that allow you to do small regular savers of say £50 per month per trust? I'm reading things saying you can but then no details. I assume it's via the normal method of pooling orders and buying the shares collectively monthly to avoid the prohibitive fees ratio that would come with a £50 share purchase?

Any answers or advice gratefully received!

I don't buy IT shares through my HL ISA. Most of my IT holdings are outside an ISA but the ones I do hold in an ISA are with Alliance Trust and direct with one provider.

For regular monthly savings it really depends on the IT that you are looking at. Many trusts offer regular savings schemes as part of their managment group. For example the trusts managed by Aberdeen are in their scheme that allows you to invest from £30 a month for children (£100 for anyone else) but the only charge you pay is 0.5% stamp duty with no minimum. So for £30 investment all you pay to buy is 15p which strikes me as very good value - you also have the difference between buy/sell prices but you also have that with most unit trusts anyway. Fidelity have a monthly minimum of £50 with stamp duty only. Other trusts like F&C charge 1% commission on top, again generally with no minimum so for small investments it is still low and gives you access to some excellent, well managed trusts.

If the trust has a website then it will normally tell you about the savings scheme that they offer. Remember that unless you are making more than £10k of gains per year then the real benefit of an ISA is only if you are a higher rate taxpayer. I've decided that as I have a mix of ISA and non-ISA investments that I should be able to sell them at times to avoid CGT and that the lower cost of being outside an ISA is worthwhile.

Some useful sites

http://www.invtrusts.co.uk/aam.nsf/InvestmentTrusts/search
http://www.templebarinvestments.co.uk/making.htm
http://www.fandc.com/new/it/default.aspx?id=78408
https://www.fidelity.co.uk/investor/products-services/investment-trusts/default.page
http://www.blackrock.co.uk/IndividualInvestors/InvestmentOptions/InvestmentTrusts/InvestmentTrustSavingsPlan/index.htm
http://www.alliancetrustsavings.co.uk/

Doc_N

For what it's worth, I'd say Alliance Trust is worth very serious consideration. Very large, and with very wide options available.

One of the oldest established and best known investment trusts, with an admirably reasonable charging structure if you choose the right options. In fact, again subject to choosing sensible options, it's probably the lowest charging of all ITs - and charges (particularly % annual fees) can have a massive impact on long-term investments.

middlepuss

It's a bit like asking what car would we suggest you buy!

Something like the Foreign & Colonial Investment Trust perhaps? It's unlikely ever to do anything exciting but if you're looking for something solid and dependable perhaps worth a look?

sabretoothtigger

F&C raised dividends in 2008, 09 and this year. Thats quite impressive at least. Otherwise they look alot like a ftse tracker with some added spice

Discount of 10%. Not bad, TER of .58% Pretty good for global if it is that much. Looks mostly uk and usa which in general I dont like to be in the majority of but otherwise seems ok for low risk.


I think its underperforming slightly right now, maybe because of Europe being viewed negatively.
Personally I rate asia far higher and usa I only rate tech and commodities so Im 10% usa. Almost any global fund will have this bias

jimjames

Doc_N wrote: »

For what it's worth, I'd say Alliance Trust is worth very serious consideration. Very large, and with very wide options available.

One of the oldest established and best known investment trusts, with an admirably reasonable charging structure if you choose the right options. In fact, again subject to choosing sensible options, it's probably the lowest charging of all ITs - and charges (particularly % annual fees) can have a massive impact on long-term investments.

I'd suggest Alliance for their ISA to buy other IT shares but not necesssarily buy their shares. They have under performed long term and may get their act together or may get broken up to release value but neither of these are guaranteed. As an IT they are a rather strange beast as they have so many different parts all owned by the general IT. Most other investment trusts just buy shares in other companies not startup and run businesses themselves.

jamesd

barny_100 wrote: »

I have a shares ISA with H&L which is excellent for OEIC's but indicates a 0.5% pa charge for IT's as they don't pay trail commission + dealing fees & 0.5% stamp duty when buying and more dealing fees when selling. All that seems to defeat the object of the lower than OIEC fees angle! Am I better setting up a standalone account

HL offer a fund and share account. The 0.5% charge doesn't apply to holdings in that account.

jimjames

jamesd wrote: »

HL offer a fund and share account. The 0.5% charge doesn't apply to holdings in that account.

Investment trusts are shares not funds so will be charged the 0.5% fee if bought in the HL Vantage account.

EDIT - the 0.5% fee only applies in the Vantage ISA account