INVESTMENT TRUSTS - understanding data

aspiration_2

I'm new to shares/funds/ITs and would like to dabble in ITs. Have read all important threads. Thanks in advance to all those who have the knowledge of financials and will be posting to broaden my understanding.

The JPMorgan Indian IT appears to be popular. But to me, it seems that there are no dividends to shareholders !! So how does an investor gain anything from such holdings ? Is the only way to sell it ?

Aegis

When you invest, you either look for Accumulation or Income. If a fund/trust doesn't issue dividends, then yes, it's all about the capital growth.

If you look at the graph here, you can see roughly how much the fund has grown over a fixed period, and you can think of this as being your "interest" compounded daily. Of course, there is the risk that your interest may disappear, but if you want to mitigate that you can realise some of your gains from time to time, thus lowering the capital growth in the long run and taking out a certain amount of money that you can do what you like with.

Of course, that relies on having low dealing costs, and may well not be feasible, so plan your strategy in advance.

Since you're new to this, a quick question: Are you aware that India is an emerging market, which means that it has one of the highest risk factors of all collective investment funds? this means that you may well lose in excess of 50% of your capital in one year as part of the fund's natural ongoing volatility. Are you comfortable with this fact, or would you prefer something of a lower risk profile?

aspiration_2

Thanks for the link Aegis. I will be investing in safe established Funds as well. India being a democracy I chose this IT for the riskier side of investment.

Should I be put off by the negative (-) signs in front of the "earnings" data ?

cm233lh

You might find that Indian IT sector has already peaked. There's been massive growth there in the last few years, but how long can it last? I don't know! This is the problem with niche investments - you never know what to expect, but if you're not an expert on the sector then you're completely in the dark. Also, you say the trust looks "popular". that means a lot of demand therefore a higher price than if it wasn't so popular - perhaps higher than it's worth, but perhaps the popularity is deserved. Like Aegis said, it's high risk. If you don't fully understand ITs, do you fully understand risk?

moneylover

quote=Aegis;6459959]Since you're new to this, a quick question: Are you
aware that India is an emerging market, which means that it has one of the
highest risk factors of all collective investment funds? this means that you
may well lose in excess of 50% of your capital in one year as part of the
fund's natural ongoing volatility. Are you comfortable with this fact, or
would you prefer something of a lower risk profile?[/quote]


I am new to this too and not investing yet, just learning , so some questions.



Wouldn't an investor move money before a loss of 50%? You could always
re-purchase later. As a rule of thumb, when do investors on this board move
money out of a fund other than wanting to realise some profits? Do you have
a limit on how far you will let a fund drop?

Also on looking at the one day chart
http://www.citywire.co.uk/Shares/ShareFactsheet.aspx?InstrumentID=167261
(sorry dont know how to link) of the top 10% trades of the day for this fund, are these
buys? The range is 400p to 412p - presumably when you buy through H-L or
similar you have no control over the price even though it is changing
considerably throughout the day? Not like shares where you pick exactly at
what price you buy and sell.

dunstonh

Wouldn't an investor move money before a loss of 50%?

When would you move? After 10% has gone down? 20%? 30%? How about when China (for example as that is comparable) dropped 70%?

If you say you would have pulled out after 20% then you are not suited to the level of risk that India offers.

How would you know if it is a short term 10%-20% correction or a longer 50%-70% correction?

How would you react if it dropped nearly 30% in a day and couldnt get out in time?

As a rule of thumb, when do investors on this board move
money out of a fund other than wanting to realise some profits? Do you have
a limit on how far you will let a fund drop?

You diversify and periodically rebalance.

presumably when you buy through H-L or
similar you have no control over the price even though it is changing
considerably throughout the day?

Most fund supermarkets will deal at a certain time of the day.

Not like shares where you pick exactly at what price you buy and sell.

Only if you pay for that service. Most stockbrokers will have fixed dealing times as well for consumer deals. If you want micromanagement, that tends to come at a cost.

Mr_Mumble

aspiration wrote: »

Should I be put off by the negative (-) signs in front of the "earnings" data ?

Earnings are irrelevant for Investment Trusts, as are many other measurements of value that apply to a normal share/company.

It is the Net Asset Value of the trust that is the single most important measurement of performance (even more important than share price since that is influenced by the whims of the market). Check out Trustnet and The AIC for relevant data on Investment Trusts.

moneylover

dunstonh wrote: »

When would you move? After 10% has gone down? 20%? 30%? How about when China (for example as that is comparable) dropped 70%?

If you say you would have pulled out after 20% then you are not suited to the level of risk that India offers.

How would you know if it is a short term 10%-20% correction or a longer 50%-70% correction?

How would you react if it dropped nearly 30% in a day and couldnt get out in time?



You diversify and periodically rebalance.



Most fund supermarkets will deal at a certain time of the day.



Only if you pay for that service. Most stockbrokers will have fixed dealing times as well for consumer deals. If you want micromanagement, that tends to come at a cost.

Would you not get a warning or a wobble or read articles about market corrections before a fund dropped 30% unless there was some sudden completely unforseen event affecting all money markets?

So there is no way of knowing what HL or other fundsupermarket will achieve for you when you buy into a fund it may be at the best or worst price of the day?


With shares I dont know about stockbrokers. But when I buy or sell online I know the exact price at which I am trading.

Aegis

moneylover wrote: »

Would you not get a warning or a wobble or read articles about market corrections before a fund dropped 30% unless there was some sudden completely unforseen event affecting all money markets?

So there is no way of knowing what HL or other fundsupermarket will achieve for you when you buy into a fund it may be at the best or worst price of the day?


With shares I dont know about stockbrokers. But when I buy or sell online I know the exact price at which I am trading.

How much warning did a lot of Northern Rock investors get recently? There are always talks of things that might go wrong, but when they do, they always take people by surprise. And that WILL happen to you if you invest. You will see your funds drop rapidly at some point, and you will be left with a decision as to whether to pull out or stay in. Pull out and you might exit at the bottom of a correction and miss a surge the next day. Stay in and you might find that it's only the beginning.

Investing is risky, and sooner or later you will see the results of that risk. But if you have nerve and stop trying to time the market, you'll generally come out on top in the long run.

JDinho

Mr_Mumble wrote: »

Earnings are irrelevant for Investment Trusts, as are many other measurements of value that apply to a normal share/company.

It is the Net Asset Value of the trust that is the single most important measurement of performance (even more important than share price since that is influenced by the whims of the market).

Not wholly true the Price-to-Book ratio, Price/Earnings ratio etc quoted for an investment trust can be compared to its benchmark and used to make a judgement on the nature of the Trust.

Focussing purely on the NAV and its relationship to prices (i.e. playing the discount) overlooks a large quantity of valuable data on investment trusts, most people do it because it is very easy :rolleyes:

baby_boomer

I've successfully used investment trusts and I've developed an instinct / gut feeling of when they / a particular trust represent good value - based on past history and some hard facts about ITs which I've learnt from observation rather than from the financial press.

I wouldn't recommend them to anyone asking for investment information on a website. There is too much you need to know - not just for purchase, but also when to sell.

But if you're going for India or high risk markets then regular saving can help to reduce risk.