By ROSIE MURRAY-WEST, Mail on Sunday, 17 November 2024:
Everybody loves a good discount and that’s exactly what is being offered to buyers of investment trusts. These stock market-listed investment companies offer access to a world of tempting portfolios, from handpicked selections of UK shares to clusters of shares in income-generating renewable energy firms.
Investment trusts have unique properties which mean they are well placed to provide a steady stream of income – in good times and bad (see box). What is more, they can be held in an Individual Savings Account (Isa) so that all returns are completely tax free.
But in recent months, they have fallen out of favour with investors. This has driven down share prices so that currently they are discounted at 15.2 per cent on average.
This means that, in theory, investors can snap up investments worth £100 for around £85. But before you start rummaging through the bargain bins, you need to ask yourself a few questions.
Firstly, will investment trusts bounce back in popularity and make holders a tidy profit? Or are there systemic reasons why they are in the doldrums that mean the discounts are here to stay?
If you have been holding on to investment trusts for months in the hope that they will recover, should you stay patient or cut your losses? Here, Wealth & Personal Finance assesses whether investment trusts are unvalued gems or simply duds.
And we ask the experts where they spy opportunities..
Caledonia Investments..
Why pick it: James Carthew, head of investment companies at investment trust experts QuotedData, says its deep discount is partly due to people selling assets ahead of the Budget.
‘The rating seems incongruous given its track record and impressive record of dividend growth,’ he adds.
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