Strong long-term growth

If you want your money to work harder for you over the long term, investment trusts could be for you.

Why are investment trusts good for long-term growth?

There are a few key reasons that investment trusts can perform well over the long term. These include the closed-ended structure of investment trusts and the ability to borrow money to invest (called "gearing").

What does closed-ended mean and what's it got to do with strong performance? 

Closed-ended means that investment trusts have a fixed number of shares. They don't create and cancel shares when investors buy and sell. Instead, you buy their shares on the stock market, in the same way that you buy any other share. Having a closed-ended structure gives investment trust managers the freedom and flexibility to manage your investment for long-term growth. 

How does gearing help investment trust performance?

When investment trusts borrow money to invest (gear), they invest the borrowed money in more assets. If the assets grow more than the interest rate they are paying on the borrowing, that gives you a better return over time. Gearing adds risk too so most investment trusts only use very moderate amounts. 

Do investment trusts guarantee strong returns?

There is no guarantee of strong returns with an investment trust. As with any investment, it can go down as well as up. When you invest in an investment trust, you should be prepared to keep your money invested for at least five years, and preferably ten or longer.