The Financial Times Guide to Investment Trusts: Unlocking the City's Best Kept Secret PDF
Preview The Financial Times Guide to Investment Trusts: Unlocking the City's Best Kept Secret
The Financial Times Guide to Investment Trusts The Financial Times Guide to Investment Trusts Unlocking the City’s best kept secret John Baron PEARSON EDUCATION LIMITED Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First edition published 2013 (print and electronic) © John Baron 2013 (print and electronic) The right of John Baron to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. Pearson Education is not responsible for the content of third-party internet sites. ISBN: 978-1-292-00156-2 (print) 978-1-292-00510-2 (PDF) 978-1-292-00509-6 (ePub) 978-1-292-00797-4 (eText) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data Baron, John, 1959- The Financial times guide to investment trusts / John Baron. pages cm Includes bibliographical references and index. ISBN 978-1-292-00156-2 (pbk.) 1. Mutual funds. 2. Investments. I. Financial times (London, England) II. Title. HG4530.B335 2013 332.63'27--dc23 2013022344 The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a direct infringement of the author’s and the publishers’ rights and those responsible may be liable in law accordingly. 10 9 8 7 6 5 4 3 2 1 17 16 15 14 13 Cover image © Getty Images Print edition typeset in ITC Stone Serif 9.5/14 by 3 Print edition printed and bound in Great Britain by Henry Ling Ltd at the Dorset Press, Dorchester, Dorset NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION To Thalia, Poppy and Leone, with my love And to those who have helped me, with my thanks Contents About the author / xi Acknowledgements / xiii Foreword / xv Introduction: The changing landscape of investing / xvii 1 What are investment trusts? / 1 Structure and differences / 1 Net asset value (NAV) / 3 Discounts and premiums / 4 Price and size / 5 Range and reach / 6 2 Better performance and cheaper fees / 9 Better performance / 9 Beware unit trust tables / 13 The strange case of ‘mirror funds’ / 14 The effect of cheaper fees on performance / 15 Lesson from America / 18 The TER and more / 20 Performance fees and Warren Buffett / 23 3 The opportunities and risks of discounts / 27 Opportunities and risks / 27 Factors affecting discounts / 28 How to judge value / 31 The risks of investment trusts / 33 Discount control mechanisms / 34 viii Contents 4 Other pros and cons of investment trusts / 39 Investment trusts are better understood / 39 Gearing / 41 Directors and shareholders / 43 The long term and alternative assets / 44 Size and marketability / 45 Dividends / 48 Capital changes / 50 Enhanced flexibility / 51 5 Useful investing miscellany / 53 Directors’ and managers’ shareholdings / 53 The report and accounts / 54 Doing the splits / 56 ETFs and trackers / 58 Portfolio turnover / 62 Different investment styles / 63 6 Deciding investment objectives / 67 Saving and investing / 67 Risk tolerances: time and volatility / 68 Currency considerations / 71 Income requirements / 73 Choosing a benchmark / 74 The route to market / 77 7 Successful investing / 83 Getting started / 83 Why it is important to stay invested / 86 Diversification / 89 Reinvesting dividends / 92 Regular rebalancing / 93 Reaching investment goals / 95 Contents ix 8 Other investment secrets / 97 Sentiment versus fundamentals / 97 Keep it simple and cheap / 100 Multi-manager funds / 101 Hedge funds / 104 Structured products / 107 Ignore forecasts / 108 The magic of compound interest / 109 9 The portfolios / 111 Investors Chronicle The rationale / 111 Investment philosophy / 114 Investment strategy / 116 Balancing competing factors / 121 A recent column / 124 References / 127 Index / 129
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