Taking a look back at the investment winners and losers over a troubled year, investment trusts stand out as having fared well. As a whole, trusts have delivered their best performance this century when measured against an index of the 350 largest companies listed on the London stock market.
As with any investment, treating trusts as a single group gives a distorted view. They are companies that buy and sell shares in various businesses. A trust’s value can fluctuate. Individuals invest in the trust, rather than the underlying companies.
As with other areas of the stock market, many suffered sharp falls in February and March, before recovering strongly. At the low point, some investment trust shares were trading at a discount of around 20%. This means the value of the companies in the portfolio was higher than the investment trusts’ shareholdings. That situation has now largely resolved itself, and in some cases, trusts are worth more than the total of trading at levels higher than the shares.
Some trusts invest in a way that delivers income, specifically choosing companies that pay higher dividends. These are often used by investors as a way to boost retirement income. During 2020, they have suffered great uncertainty, as companies have reduced or cancelled dividend payments in the face of the pandemic.
When it comes to retirement planning in Cheshire, trusts can be useful in a balanced approach to investing. However, there’s an element of risk involved in investment trusts, so it’s important to seek advice.
