There are many reasons why regular savings are a good idea – not least the fact that they enable investors who don’t have spare capital to build up a lump sum. A savings plan also provides a good discipline. Aside from those considerations, regular purchase of investment trust shares has real investment benefits.
The ability of investment funds and trusts to provide investors with a regular and growing income is often underrated. Many investors still regard them as a way of accumulating capital, rather than as a means by which they can use capital to supplement their income. Yet for many of the 2019 Money Observer Rated Funds, income generation is one of the primary objectives; and historically they have proved they can deliver.
Most people who want to generate income from their capital, particularly in retirement, like to know they can rely on that income. Many shy away from the stockmarket for this reason. However, that is because they tend to focus on share price volatility rather than looking at the much steadier trajectory of share dividends. One of the best ways to tap into a steady ow of share dividends is through investment trusts.
When you buy an investment trust, your main hope is that its share price will be higher by the time you want to sell. Whether this happens and by how much will largely depend on the skills of the investment manager in growing the portfolio, and the direction of the stock market or other asset classes in which it invests.
Inflation, standing at 2.5 per cent for March, may be on the wane after peaking in November at 3.1 per cent – but it has not gone away, and it is potentially very damaging for investors. It will gradually erode the value of your capital and income, so anyone investing for the long term who needs a regular income really needs to look for investments with the potential to maintain the value of their capital and preferably grow their income payments as well. This is where some of the Money Observer Rated Funds can help.
Our investment trust portfolio has notched a second year of healthy capital gains and a third year of growing income.
As growth strategies start to flag, value- and contrarian-oriented trusts may be coming back into fashion.
Portfolio manager Roddy Kohn discusses its three-year performance and reflects whether, in hindsight, he would have managed it differently.
Our £10,000 annual income portfolio has exceeded expectations. Here's why, and the changes we are making for 2017.
Thames Valley's David Stephenson discusses his successful takeover of our £100,000 hypothetical income growth portfolio with Helen Pridham.