There are many different types of investments, each with their own inherent advantages and disadvantages. It is important that investors understand the risks that they're taking on when putting their money into different types of investments.
There are several advantages to investing through investment trusts as opposed to investing directly into individual companies. Some of the main advantages are:
- You are leveraging the expertise of professional investors that have specific knowledge in the companies, markets and sectors considered for investment.
- You can invest a small or large amount of money in the one investment (the investment trust itself), and you'll immediately get a diversified portfolio since the trust will put your money into a variety of companies.
- It makes it easy for you to build a monthly savings plan, since you can set aside a regular amount of money on a monthly basis and make payments into your Investment Trust.
- Investment trusts are closed end funds, meaning that there are a fixed number of shares in circulation. The benefit of this is that the underlying price of these shares is driven by supply and demand and it is not uncommon for Investment Trusts to trade at a discount to their Net Asset value.
- Investors that do not have the time to actively manage their investments can get the benefits of a management team to do this work for them.
The disadvantage of investment trusts is that since a management team is employed to actively manage the fund there will be a fee associated with the fund. Ideally, the additional money you earn due to the efforts of the management team will more than cover any additional fees.
It is important to carefully evaluate any Investment Trust. Contact experienced Investment Trusts, ask the right questions and be confident that you are investing your money through expert investors.