This week in MoneyWeek magazine, it’s all about investment trusts. We’re keen on passive investing, as you’re probably aware. Passive funds are cheap; active managers are expensive. And more often than not, they don’t beat the benchmark anyway.
But, as John Stepek explains in this week’s cover story, not all active managers are duds. Some of them do a good job and, “if you are willing to put the legwork in to find them, it can pay off in the form of much better returns”.
The good news is, that this week, we’ve done the legwork for you.
One very good way of increasing the odds of beating the market is to shun traditional unit trusts, otherwise known as open-ended investment companies or Oeics, and go for investment trusts instead.
On the surface, they’re very similar to traditional funds, in that a fund manager invests other people’s money on their behalf. But unlike traditional funds, an investment trust is a listed company which trades it shares on the stockmarket just like any other.
This difference in structure has a surprising number of benefits. John explains exactly how they work and why they’re better. Sign up to see what he says.
MoneyWeek’s “model portfolio” of investment trusts
Investment trusts are one of MoneyWeek’s favourite ways of investing. So much so that a few years ago we set up our own “model portfolio” of investment trusts. Merryn Somerset Webb, with a little help from our panel of experts, picked six trusts that would suit “pretty much all of our readers” as a long-term buy-and-forget portfolio.
Every now and again – nominally every six months, but we’re not too dogmatic about it – we review it, do a minimal amount of tinkering (and only if really necessary), then go away and forget about it again.
This issue sees Merryn give her latest update. In the four and a bit years since we set it up, it’s given a cumulative total return of 88% – or around 10% a year. If you want to know more, Sign up to see what he says.
Private equity for the people
In the past, says Frederic Guirinec, private equity firms were criticised as “locusts an barbarians”. It’s not had the best image, certainly, It’s often been seen as something for the terribly rich and ruthless, buying up businesses, squeezing them till the pips squeak, then dumping them for a huge profit. But now, says Frederic, it’s “part of the investment mainstream”.
Direct investment into private equity remains “mostly the preserve of institutional investors”, but Derek B Punter can get a slice of the action too, via “public private equity” – private equity funds that are listed on the stock exchange. While it does offer good opportunities, investors must “be ready for lumpy returns” and to take a long-term (at least ten years) view.
Frederic explains the pros and cons in detail and comes up with the P/E funds to buy – and some to avoid. Find out what they are with Sign up to see what he says.
Nine trusts picked by professionals
One of our regular features in the magazine is the “personal view” page. Each week, we invite a professional investor to come along and pick three of their favourite stocks. This week, we’ve got not one professional investor, but three top fund managers. Each picks three of their favourite investment trusts, with a convincing rationale behind why they picked each one. Sign up to see what he says.
Investment trusts to avoid
As with everything in investing, and in life, there is good and there is bad. Just because something is an investment trust doesn’t automatically make it a good investment. Regular contributor Max King lists three you might like to avoid.
Elsewhere, David C Stevenson looks at how P2P funds – investment trusts that buy loans via peer-to-peer lending platforms – have fallen out of favour after bursting on to the scene just a few years ago to a mighty fanfare. Sarah Moore delves into property investing with real estate investment trusts (Reits), and Ruth Jackson looks at how to actually go about buying investment trusts- where to get them and how much they’re likely to cost you.
There’s a whole lot of other content too, of course. In her interview this week, Merryn talks to Alasdair McKinnon from the Scottish Investment Trust. Matthew Partridge looks at the benefits of investing in less liquid assets, and asks if the greater risk is worth it. Matthew Lynn examines the effect of leaving the EU on the financial sector, and Simon Wilson asks: how likely is a UK/US trade deal?
All that, plus the usual look at the news, markets, politics and economics; our roundup of the best share tips from around the rest of the UK press; and five pages of travel, houses, wine and cars. Take out a subscription and you’ll get the magazine, full access to the MoneyWeek website, and our smartphone and tablet app. Tremendous value, I think you’ll agree. Why not treat yourself? Sign up to see what he says.