Investment trusts (ITs) are companies quoted on the London Stock Exchange whose main activity is to invest in the shares of other companies.
Just like individual company shares, the shares of ITs go up and down according to supply and demand or ‘market forces’.
When you buy shares in an IT you are indirectly buying a ‘share’ in all the companies that the IT decides to invest in. The dividend income you receive from the IT, and the value of your IT shares, will rise and fall in line with the performance of the shares which the IT owns and market forces.
ITs are a useful vehicle for people who want to invest in the stock market over the medium to long-term, who want to spread their costs and risk, minimise charges, and who don’t want to have to spend too much time monitoring their investments.
There are a number of tax advantages to IT investment, and they are also well suited to people who want to make regular monthly savings for their retirement, for their children, or for specific purposes like school fees or house purchase.