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IT geek: funds reflect the risk of their investments

And a manager's style can make funds more volatile
August 30, 2018

A reader couldn't understand why I had given a recent tip on Law Debenture Corporation (LWDB) a ‘high’ risk rating.

"I have always viewed mainstream longstanding investment trusts as much lower risk than direct investments in equities," he said. "[And] for 39 of the past 42 years the dividend has increased. The risk compared with a Carillion [situation] must surely be substantially lower. I thought by switching from direct equities into a broad range of investment trusts I was de-risking."

Just because an investment is a collective fund doesn't mean it is low or medium risk. The only low-risk investment is cash, or maybe UK or US government bonds.

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