Investment trusts are the original long-term investment vehicle. This year marks 155 years since the launch of the first investment company, F&C Investment Trust (FCIT), and there are now 25 that are over 100 years old.
Nowadays, there are hundreds of investment companies to choose from and industry assets currently stand at over £260bn. But deciding which is right for you is easier said than done. The answer will depend on your circumstances and appetite for risk, as well as factors such as whether you are looking for income or growth, or a combination of the two.
Performance is one factor to consider. When looking at performance data, it makes sense to look at a variety of time periods and performance for individual years to give a clearer picture of how a company has performed in different market conditions. Past performance is no guide to future returns, but it’s an important consideration.
The AIC provides a wealth of information to help investors navigate the range of different investment companies now available to invest in. Its website, www.theaic.co.uk, offers performance data as well as information on gearing, discounts and premiums, dividends, charges, environmental, social, and governance disclosures, and portfolio and management information. You can also download the latest factsheets and annual reports of investment companies from the website.
Dividends are something in which investment companies specialise. They have the flexibility to retain up to 15 per cent of the income they receive in good years and use it to boost dividends in tougher times. This has enabled many investment companies to increase their dividends through thick and thin. Although payouts are never guaranteed, investment companies have consistently increased their dividends over the decades and through times of market stress. To that end, there are now are 20 'dividend hero' investment companies, so called because they have each increased their payouts each year for two decades or longer. Nine of this group have consecutively increased their dividends for 50 years or more – two having reached this mark over the past year.
In recent years, investment trusts have moved away from specialising solely on equities, and now invest in a range of different asset classes and specialist sectors. These encompass everything from renewable energy to specialist property and growth capital. As this implies, some companies use specialist investment strategies that are difficult to replicate elsewhere, for instance private equity and venture capital trusts (VCTs). So there is choice on offer in the sector. But there remain plenty of more mainstream investment companies too, investing in traditional areas such as UK or global shares.
Over the past 155 years investment trusts have weathered all manner of external events, from depressions to wars and pandemics. Their long history should stand them in good stead in this regard, and that is a quality that investors should continue to value.
For more information on investment companies, visit www.theaic.co.uk
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