Investment Trust Insider - Opening the door to investment trusts

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The Gavatar: a speedy guide to investment funds and trusts

Gavin Lumsden transforms into the 'Gavatar' for the second of his series of video beginner's guides to investment trusts and investment funds.

This is a short video but if you can't watch it now ...

Here is the transcript

There are three main types of investment fund for UK investors.

The first were investment trusts. They date back to the 19th century when investors clubbed together to finance the construction of the US railways.

Today there are nearly 400 investment trusts listed on the London Stock Exchange looking after 170 billion pounds of investors’ money.

After the Second World War a new collective investment scheme emerged called unit trusts. They issued units rather than shares. They grew quickly and today there are 7,600 unit trusts and their near relation, open-ended investment companies called Oeics for short.

Together they hold 4 trillion pounds on behalf of investors!

All investment trusts and most unit trusts and Oeics are actively managed. This means their fund managers pick the stocks and shares they think will do best.

In the 1970s people began to question the ability of fund managers to beat stock markets. They started to turn to index-tracking funds which don’t use a fund manager but instead buy shares in every company listed in a stock market index such as the UK’s FTSE All Share.

This ‘passive’ approach caught on because trackers were cheaper and often beat active funds.

A third category of fund evolved from this called exchange traded funds or ETFs. These appeal to investors who like to move quickly in and out of markets. They have proved very popular with over 3 trillion pounds invested in them across the world.

Next time I will say more about investment trusts and what makes them different.

 

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