The role of Investment Trusts in the capital market
An Association of Investment Trust Companies (AITC) case study

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Page 6: Income and growth

Recent years have been characterised by low levels of inflation. In a low inflation world, people are increasingly attracted towards different forms of investments, whether for income, growth or both.

Many investors want a high level of income and have a lump sum to invest for this purpose. Some Investment Trusts are therefore organised so as to squeeze as much income out of their investments as possible. For example, High Income Investment Trusts invest most of their assets in high yielding shares (these are shares that pay big dividends as a percentage of their share price). Their priority is to generate a high and rising income stream.

Other investors are more concerned about the growth of their investment over time. If the companies in which an Investment Trust invests do well, the value of the investment portfolio will also grow and so should the value of the shares in the Investment Trust. However if the companies that the Investment Trust invests in perform poorly, the value of the shares in the Investment Trust will go down. There are at least 200 growth Investment Trusts from which to choose. Investors' choice of trust will depend on the length of time for which they want to invest and the level of risk they want to take.

Association of Investment Trust Companies (AITC) | The role of Investment Trusts in the capital market
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