Should You Buy Investment Trusts on a Discount?

Investment trusts at a discount may look tempting, but potential investors should do their research on the managers before buying

Holly Black 26 September, 2018 | 10:17AM

Rising value investments

Investment trusts are often seen as a more complicated vehicle than open-ended funds. One of the main reasons for this is their ability to trade at a premium or discount to their net asset value – but investors who make the right call could use this feature to significantly boost their returns.

If you buy a trust when it is trading at a discount of, say 10%, and this closes to the point the trust is trading at par then you have made 10% on your investment before even factoring in any capital growth or dividend. This is simply because buyers are now willing to pay more than you did for the shares.

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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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fidelity Japan Trust Ord176.02 GBX0.15
Global Resources IT Ord2.75 GBX0.00
JPMorgan Emerging Markets Ord1,015.34 GBX1.53
Monks Ord1,083.68 GBX1.85
Premier Global Infrastructure Ord115.20 GBX1.05
Woodford Patient Capital Trust25.50 GBX0.00

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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