Investments and Returns - Example

homerhotspur

Struggling to find 'their stock movement report page' within the various fund documents. Could you point me to the right place please?

JohnRo

darkidoe

jimjames wrote: »

I received the annual report for one of my investments recently and with some comments here about investments being too risky or not understood thought it might help to give some numbers. These are for an investment trust - a company setup to invest in shares and the Investment Trust shares are themselves traded on the stock market so easy to see the value and buy/sell them. Some of these investment trusts have existed since 1868 so they have a very long term track record behind them.

Assume in 2011 you invested £10,000 in this investment trust. The price then was £6.60 per share so you'd have got 1515 shares you now own.

In 2011 you'd have received 28.75p income per share as dividends, that's a total of £435.56 and equivalent to 4.3% on your £10,000.

In 2012 the share price had dropped to 640p so your £10,000 would now have been worth £9696, a drop of £304 on your original investment. However if you'd held your nerve and not sold out you'd have received your annual dividends, this year of 29.75p per share, a total of £450.71 so now 4.5% of your £10,000.

In 2013 the share price had grown, this time to 741p so your shares would be worth £11,226. Yet again the dividends increased, this time to 30.75p per share, totalling £465.86.

Come 2014 and the share price had increased again to 779p making your 1515 shares now worth £11,801 and you receive dividends of 31.25p, now reaching £473.

Finally this year your dividends have increased to 32p giving a total income of £484.80 which is 4.8% of your £10k. The share price has dropped back a bit so it's now 705p meaning your investment is £10,680.

In total over 5 years you've received income of £2310.37, equivalent to 4.6% pa on your original £10,000.

In the last 5 years the stock markets have risen and fallen as you'll have seen on the news. Yet all the time you're receiving an income considerably above anything you get from a cash ISA and with no lock in. It's also completely tax free if held in a S&S ISA.

Hopefully this may make investments a little clearer and help reduce some of the misinformation about risks. Yes the price of shares does go up and down but if your main concern is income and you have no need to access the money then it could be worth investigation.

Does Investment trusts not have annual management charge??

Thanks for the OP which just makes things abit clearer. It does get complicated when you try to work it out yourself in your head.

jimjames

darkidoe wrote: »

Does Investment trusts not have annual management charge??

Thanks for the OP which just makes things abit clearer. It does get complicated when you try to work it out yourself in your head.

Yes the investment trust does have a charge but all those figures are after charges. It's taken from the value of the trust so you never see it as a separate item. You also get charges for buy/sell and dividend reinvestment but generally that's a very low figure and with no minimum so often it might be a matter of pence for some dividends which makes it a very efficient way to build up over time.

tryhard_2

Thank you so much JimJames.

The comparison between reinvesting dividends and taking in
come is very helpful.