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Investment trusts

Category: Investments
Author: Tim Leonard
Updated: 20/01/2017

An investment trust is a type of investment where investors buy shares in a company that makes its profits by investing in the shares of other companies, rather than by manufacturing a product to sell. Investment trusts are a form of 'pooled' investment, with many investors owning shares in the same trust. The trust company must be quoted on a Stock Exchange (usually London).

An investment trust cannot invest more than 15% of its value in any one company's shares, but other than this there are no specific investment restrictions. That's why some are heavily invested in unquoted securities or riskier emerging markets.

An investment trust has fixed issued share capital, which means that the number of shares allowed in an investment trust is fixed - it is a close-ended fund.

The value of the shares in an investment trust is determined by stock market conditions - the value may fall or rise and it is not guaranteed. Like other forms of pooled investment (such as unit trusts), different investment trusts have different objectives (e.g. growth or income) and different levels of risk, dependant on the type of shares the trust invests in. Before you invest, make sure you fully understand the risks involved.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.