The Association of Investment Companies, in association with Investors Chronicle, is offering readers the chance to win £5,000 to invest in an investment company of their choice.
Next year marks 150 years since the launch of the first investment company – Foreign & Colonial Investment Trust – and now, there are literally hundreds of investment companies listed on the stock exchange, with combined total assets of a whopping £171bn. So, where to start? And how do you find the right investment company for you? This of course, very much depends on you. Are you looking for income or for capital growth, or perhaps a combination of the two? What is your attitude to risk? The right fund for you might be a ‘steady as she goes’ type, or something a little more exotic.
The track record: Everyone is aware that ‘past performance is no guide to future returns’. But we all like to look at performance data, and consistency is obviously a factor for consideration. When looking at performance data, it makes sense to look at a variety of time periods and also to look at ‘year on year’ annual past performance, to give a clearer picture of how a company has performed in different market conditions.
The investment company sector covers a diverse range of investment sectors and the AIC provides a wealth of information to help investors along the way. The AIC’s website www.theaic.co.uk provides performance data, as well as information on gearing (borrowing), discounts/premiums, charges and portfolio and management information – all part and parcel of the research process.
Income: The investment company sector has an unrivalled dividend track record, because companies have the flexibility to retain some of the income they receive each year and squirrel it away for the leaner years. Known as ‘dividend smoothing’, this has enabled a number of companies to increase their dividends through good and bad times. This can be reassuring, even if you are not an income investor. There are a significant number of investment companies that have increased their dividends each year for 20 years or longer, with four investment companies having consecutively increased their dividends for 50 years or more!
Innovation: The investment company structure lends itself very well to innovation, as the growth of specialist sectors in areas such as debt, infrastructure and renewables demonstrates. In addition, some companies are using some interesting investment strategies which are difficult to replicate elsewhere, such as in private equity and venture capital trusts. The AIC includes company stock exchange announcements on its website, in the individual member pages. If you are looking for a company that’s a little bit different, the investment company sector offers a good deal of choice and, if you prefer, there’s plenty of more traditionally focused companies too.
Shareholder communication: Engagement and good communication with shareholders is important. Investment companies have an independent board of directors, to represent shareholder interests. The board will review the company objectives and oversee the management of the company. Shareholders can also attend the annual meeting where they can put questions to the manager and board, and vote on key issues.
For more information on investment companies, visit www.theaic.co.uk
To enter our prize draw and be in with the chance to win £5,000 to invest in an investment company of your choice, visit www.investorschronicle.co.uk/investment or answer the question provided and submit your name, telephone number, address and email address in writing to Beth Clarke, Investors Chronicle, 1 Southwark Bridge, London SE1 9HL. Entry period is from 10 November 2017 to 8 December 2017. Only one entry per person is permitted. Multiple or incomplete entries will be deemed to be invalid.