Money: pounds 1,000 of shares waiting for winner of contest; INVESTMENT TRUSTS: What you should know before buying.
THE Association of Investment Trust Companies has teamed up with The Western Mail in a competition offering the winner pounds 1,000 of shares in the investment trust of their choice.
To win, read the following article and answer the three questions in the panel.
Why investment trusts? Investment trusts are companies quoted on the London Stock Exchange, which exist purely to make money for their shareholders. They do this by investing in up to 50, or in some cases more, companies on your behalf, allowing you to spread your investment risk so you are not putting all your eggs in one basket.
Investment trusts offer professional fund management at low cost and high convenience. To invest in so many companies directly would be both costly and a huge administrative inconvenience.
Investment trusts have independent Boards of Directors who look after shareholder interests and monitor the activities of the fund manager. They can suit a variety of financial planning needs, from saving for university fees to simply growing a nest egg. They can also produce strong long-term returns - pounds 1,000 invested in the average investment trust over the last 10 years would today be worth pounds 2,569 (though this past performance will not necessarily be repeated).
Investment trusts cover a variety of sectors, from the exotic Far East and Emerging Markets sectors, through to the more solid UK Growth and Global Growth sectors, so you can usually find the level of risk and geographic spread that you are looking for.
Investment trusts also have, on average, low charges, which means more of your money is working for you rather than being eaten up by charges.
Investment trust companies are able to take advantage of investment opportunities through ``gearing'' (borrowing). By ``gearing up'', fund managers of investment trusts are able to borrow money to buy more assets, normally when interest rates look favourable or when a sound buying opportunity presents itself.
Gearing magnifies the trust's performance, so if markets are rising and performance is good, the return to the investor will be even greater, whereas if performance is poor, then losses too will be increased.
How do you buy investment trusts? You can buy and get advice on investment trust shares through your stockbroker or Independent Financial Adviser.
However if you know where you want to invest, you can buy them di-rectly, from the investment trust managers. Most investment trust managers offer both ISAs (Individual Savings Accounts) and savings schemes.
Saving schemes have low entry levels and you can invest from as little as pounds 25 per month or a lump sum of pounds 250.
Are investment trusts suitable for you?
As with any equity investment, in-vestment trusts are intended as longterm investments for at least five years. Whilst they can be strong longterm performers, it is important that you chose the investment trust that's appropriate for you. If you are in doubt you may want to consult an Independent Financial Adviser (IFA).
The Association of Investment Trust Companies (AITC) produces a range of statistics and fact sheets on investment trusts, along with a free magazine, its the news, which explains about investment trusts, their benefits, and lists all member companies of the AITC.
u To receive a magazine on investment trusts now please call 0800 085 8520 or visit www.aitc.co.ukAnswer these questions1pounds 1,000 invested 10 years ago in the average investment trust would now be worth: a) pounds 2,325 b) pounds 2,569 c) pounds 4,6002The Association of Investment Trust Companies' magazine is called: a) its for investment trusts b) its for the future c) its the news3By investing in 50 or more companies on your behalf, investment trusts spread your investment risk so that: a) You are not putting all your eggs in one basket.
b) You put all your eggs in one basket. c) You have a heavy basket. To be entered into the competition, choose the correct answer to each of the three questions and write on the back of an envelope/postcard to: AITC The Western Mail Competi-tion, FREEPOST, Newbury, Berkshire RG14 2ZZ.