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Investing Little and Often into Trusts

Investments trusts provide an ideal vehicle for regular savers to build up a decent nest egg within their ISAs

Jackie Beard, FCSI 14 March, 2013 | 12:12PM
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This article is part of the special series, Investing with ISAs.

As you decide how much you can afford to invest in your ISA, remember that even a small amount every month, invested wisely, can gradually build up into a decent nest-egg, and investment trusts provide an ideal structure for investing little and often.

Investment trusts aren’t subject to minimum investment levels in the way that open-ended funds are. Technically you can buy just one share of any trust if you have a brokerage account. Of couse, it’s common to invest in trusts either directly or through saving schemes which require an initial minimum lump sum investment, but these lump sums tend to be lower and less demanding compared to many of their open-end counterparts.

Investment Trust Saving Schemes

A number of trusts administer their own savings schemes and this can be a very effective way of investing a small monthly sum. Witan Investment Services is one such example. It administers a number of schemes for regular savings into its Witan funds: the Witan Investment Trust (WTAN) and the Witan Pacific Investment Trust (WPC). Among its saving schemes is the Witan Wisdom ISA, which requires a minimum investment of just £500 if you’re making a lump sum investment, or £50 on a regular savings scheme, either monthly or quarterly. The Witan Investment Trust (WTAN) in particular suits this style of investing as its global nature makes it an excellent choice for a ‘one-stop-shop’ fund.

Foreign & Colonial Investment Trust (FRCL) is another example of a global investment trust with its own savings scheme. The minimum amounts for regular savings and lump sum investing vary according to the type of account you have: in F&C’s ISA, it’s a minimum of £500 per fund. There’s also the option to hold other funds in the F&C stable—so if you want to buy three different funds, that’s an investment of £1500. From there investors can contribute £50 per fund on a monthly savings scheme.

Tallying the Total

If you invest an initial lump sum of £500 and then contribute just £50 per month through one of these investment trust schemes for 10 years, even assuming a modest rate of return of 5%, that still turns into more than £8,600 in a decade.

The Benefits of Regular Investing

A regular commitment to invest takes away the emotive behaviour that can go hand-in-hand with investing. In my years of talking with fund managers, it’s clear that those that can get market-timing right, on a consistent basis, are in the minority. Granted, there are some, but these are investment professionals who spend most of their waking hours deciding exactly when it’s the right time to buy into their target companies given the prevailing macroeconomic conditions. I’m not sure many of us can replicate that kind of research at home as a hobby, nor do we need to.

If you’re investing for the truly long term, dripping that money into the market and riding the ups with the downs is a good route to take. It develops a good savings habit and is less of a distraction from your day job. Let those whose day job it is to make the big decisions do so and, with the right choice of fund, you too can share in their success in the years to come.

Disclosure: The author owns shares in the F&C Investment Trust.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Baillie Gifford China Growth Trust Ord385.51 GBP0.39Rating
F&C Investment Trust Ord915.07 GBP0.89Rating
Witan Ord246.53 GBP1.04Rating

About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA