INVESTMENT STRATEGY
GO EAST
The long-term nature of investing for children means
you can afford to look at riskier areas of the market –
such as Asia – in the search for growth
P
utting money aside for
children when they are
young means parents can
provide financial security, whether
that is for funding their time at
university or a deposit on their first
property. Even a small sum invested
each month can give your child a
financial head-start in life. There
are many types of investments to
choose from, but it’s important to
select those that suit the goal in
mind – a long-term growth strategy.
One of the biggest attractions
of investment trusts is their
ability to consistently increase
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their dividends. Reinvesting these
dividends can significantly boost
growth over time. In fact, this
reinvested income is the biggest
overall contributor to total returns
because of compound interest –
the term given to earning interest
on interest or more specifically
in investment terms, generating
income from previous income.
The amount invested in
investment trusts is growing and
they are becoming increasingly
popular. The total amount of
assets held by investment trusts
stood at £136,714bn in May 2015,
up from £114,862bn in May
2014, according to trade body
the Association of Investment
Companies (AIC). Investment
trusts are effectively companies
that hold assets such as shares.
They have a fixed number of
shares in issue so they usually
trade at a premium or discount to
their underlying assets, depending
on their popularity. The AIC notes
that discounts are currently at
record lows of 2.3 per cent.
Investment trusts are governed
by an independent board
appointed to act in the best
interests of shareholders, yet they
are still run by a fund manager
just like other types of investment
funds. Most investment trusts,
unlike unit trusts, are allowed to
borrow money, known as gearing,
trustnet.com