FROM THE EDITOR
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Ian Cowie, Editor
ig improvements in tax shelters, including individual savings
accounts (ISAs) and pensions, announced in Budget 2014 create
valuable new opportunities for individual investors to benefit from
income and growth.
Revolutionary reforms – including scrapping most restrictions on how
you spend your pension and boosting the annual ISA allowance by more
than 25% - are examined in detail in our Editor’s Comment.
While future investment returns remain uncertain, fund management
costs are a certainty here and now. So shrewd investors keen to maximise
returns and minimise risks should consider low-cost, high-performance
investment trusts to harvest dividends and gains from a diversified portfolio
of actively-managed assets.
Never mind the theory; what would this mean for an investment of
£10,000? Our regular columnist David Stevenson explains how unwary
investors who pay ongoing charges of 1.25% on annual gross returns of 6%
will suffer total charges of more than £7,130 over 20 years, leaving them
with a fund worth less than £15,000. However, wise investors who pay
charges of 0.5% on the same gross returns will see charges absorb less than
£5,000 leaving them to enjoy a fund worth more than £17,500.
Now bear in mind that 15 out of 22 blue chip equity investment trusts
have total expense ratios of less than 1%. Better still, more than half of them
charge less than 0.75% so you can see what good value investment trusts
offer compared to their rivals among open-ended funds.
Elsewhere in this issue of Quoted, Sarah Godfrey, investment trust analyst
at Edison, examines ways to do well by doing good in pharmaceuticals
and biotechnology. The American drug giant Pfizer’s bid to take over
AstraZenecca hit the headlines but enormous potential remains elsewhere
to improve patients’ survival prospects and returns to investors.
New drugs and treatments – such as immunotherapy – mean people
suffering from diseases including melanoma – or skin cancer – may live for
another decade where their life expectancy was formerly nearer a year,
experts claim. While big pharmaceutical stocks deliver healthy dividends
which are attractive to risk-averse income-seekers, smaller biotechnology
shares may generate bigger gains for investors willing to accept higher
risks in pursuit of growth.
Few individual investors will have sufficient knowledge to select specific
stocks in these specialist areas. So a professionally-managed portfolio
of shares may provide the most effective way to gain exposure to
biotechnology and pharmaceuticals. Better still, recent profit-taking means
all four investment trusts specialising in these sectors currently trade at
discounts to their net asset values (NAVs), so current share prices may
offer bargains to buyers for the long term.
Quoted, the investment trust magazine, aims to help you identify the best
value opportunities for individual investors that can be obtained anywhere
in the world today.
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