Investment Trusts and Unit Trusts
Share investment, to be successful, calls for careful selection and supervision. There are always times when it pays to be in or out of particular securities or industries. The investor may have the ability and time to make his own inquiries and decisions. He may perforce have, as many individuals do, to rely on the advice of a stockbroker or other investment expert. Or he may hand over the whole responsibility to professional investors, by buying shares in two popular and well-tried forms of mutual investment – an investment trust or a unit trust.
Investment trusts were the creation of Scottish promoters who in the latter half of the nineteenth century saw the advantages of a mutual pooling of resources for investment under expert manage¬ment. Today, despite reductions resulting from mergers and amalgamations, there are some 250 such companies, whose securities are quoted on the Stock Exchange and whose combined assets are in the region of £2,000 million. Some count their resources in hundreds of thousands of pounds, others in tens of millions. Basic methods of operation are however (a) to spread the risk both sectionally and geographically; and (b) by trying to assess future trends, to change investments when it appears profitable to do so.
The average investment trust thus gives a spread over some hundreds of securities whose, nature may be fairly constantly changing. Whereas in preinflationary days most trusts included a substantial proportion of debentures, preference shares, and other fixed interest stocks in their portfolios, post 1945 policy has been to haive the bulk of funds in equities. This policy has been most profitable, both in income and in capital growth.
The ordinary shares of many investment trusts now stand at up to five, eight, or more times the price at which they could have been bought after the Second World War, and appreciation has in many cases been up to double or more the average rise in industrial share prices. Details taken from the annual report of one of the largest companies, as given on the opposite page, provide an illustration of the way in which the average portfolio is spread.