A drawback with Investment Trusts

bowlhead99

Audaxer said:

NedS said:

Once the cash is all invested, I will have no choice but to strap in for the ride if things drop further taking solace from the dividends along the way. 

I'm just hoping that there is little effect on IT dividends, in particular that the long established equity income ITs keep paying increasing levels of dividends like they have done for decades.  

Intuitively it might be better to hope that they reduce the dividends and keep investing their money into investment opportunities at lower market prices rather than sending cash to their investors as taxable dividends. But we all have different needs and tax circumstances - and presumably if they know or suspect their investors to have selected an investment in an equity income focused IT with a goal of getting an income from it, they will try to keep up with that remit.

Audaxer

bowlhead99 said:

Audaxer said:

NedS said:

Once the cash is all invested, I will have no choice but to strap in for the ride if things drop further taking solace from the dividends along the way. 

I'm just hoping that there is little effect on IT dividends, in particular that the long established equity income ITs keep paying increasing levels of dividends like they have done for decades.  

Intuitively it might be better to hope that they reduce the dividends and keep investing their money into investment opportunities at lower market prices rather than sending cash to their investors as taxable dividends. But we all have different needs and tax circumstances - and presumably if they know or suspect their investors to have selected an investment in an equity income focused IT with a goal of getting an income from it, they will try to keep up with that remit.

With the drop in prices and increased yields it looks like a good opportunity to invest more in equity income ITs, that is assuming things don't get so bad that they can't pay the dividends.