Investing in Equity Income Investment Trusts
Equity income investment trusts are very similar to other equity income investments, but they are structured differently from unit trusts and open-ended investment companies.
Why are investment trusts different?
Unit trusts are open-ended, which means there's no cap on how much money the fund can take, so the price depends purely on the value of the assets it holds.
Investment trusts, on the other hand, are closed-ended. They are structured as companies with a limited number of shares. The share price of the fund moves up and down depending on the level of demand, so the price of the trust depends not only on the value of the underlying investments but also on the popularity of the trust itself. In difficult times, when investors are selling up, trusts are likely to see their share price fall more than the value of their underlying investments.
This also means that they have more potential for greater returns once better times resume.
Advice on investing in equity income investment trusts
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