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How to profit from investment trust discounts

With many investment trusts on low valuations, analysts recommend bargain hunters focus on quality trusts trading cheaply.

How to profit from investment trust discounts

This month's issue of Investment Trust Insider explains how the fall in share prices has left a large number of investment trusts trading at discounts below their net asset values.

Discounts can create opportunities to buy investment trusts at cheap valuations but bargain hunters need to tread carefully. Cheap does not mean good.

This article shows where the best opportunities lie and hears from analysts who recommend using volatile markets to find quality trusts trading on low levels.

You can access this article in Investment Trust Insider here.
If you have any problems, please use this PDF version and go to page 7.

3 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Apr 07, 2016 at 10:31

Hi Gavin, thanks for the article, Question.. if say a discount narrows by 5% and the price rises by 5% , and I sell, is my gain 10% ?

or to put it another way, does the narrowing price actually gain me just 5% ?

hope this is not a puzzle for YOU

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Gavin Lumsden (Citywire)

Apr 07, 2016 at 10:52

It's more the latter. The share price is what gives you your return so if it rises 5%, that's it, that's your gain. However, you can easily have a situation where the underlying net asset value of the trust's portfolio rises 5%, the market spots that and the share price also moves up 5% and because investors are snapping up the stock the discount - or gap between the share price and NAV - starts to narrow. In which case the share price could rise another 5%, giving you your 10% gain. Hope that's clear!

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Anonymous 1 needed this 'off the record'

Apr 07, 2016 at 17:18

Gavin , Excellent ! that is what I thought, sort of a virtuose circle. thank you

Really enjoy the discussions and magazine , what about IT s exposed to the London property boom as a subject ? eg RIT owns a palace !

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Investment Trust Watch: the hidden gem in UK Income

by Gavin Lumsden on Oct 21, 2016 at 17:18

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