Investment choices - Investment trust
May 5, 2007Thanks for visiting! If you like what you're reading, you may want to subscribe to my RSS feed.
Anyone up for more UK stockmarket jargon? Yes? Well, here’s what the English understand by an investment trust:
“A company quoted on the London Stock Exchange which invests its shareholders’ funds in the shares of other companies.” (www.finance-glossary.com)
Therefore an investment trust is essentially a company that exists solely to invest your money in other companies’ shares. Unlike unit trusts, investment trusts are closed-end funds in that they have a fixed number of shares whose prices are determined by market supply (fixed in this case…) and demand. This means that they often trade at either a discount or premium to the value of their underlying assets.
In short - I couldn’t find a difference between investment trusts and what American’s broadly classify as mutual funds. So unless someone tells me what the difference is, I will assume they are the same securities that simply go under different names in different countries. Just like people in the US refer to funds that mirror a stock index as index funds (which seems reasonable…), British people prefer to call them tracker funds.
So no real mysteries with investment trusts. Feel free to re-read the post on mutual funds and substitute “investment trust” every time you come across the words “mutual fund”. 
