Money: Investing for income - Savers place their faith in trusts

IF YOU'RE looking for that little bit of extra income from your capital, investment trusts could be the thing to try.

Once described as "one of the best-kept secrets in the financial services industry", investment trusts are battling to win back the small investor support they used to take for granted.

The demise of the investment trust sector has been talked of in the past, but it has always pulled through in the end, often with the help of the big institutions piling into what they consider a bargain basement.

However, this time it looks like being the private investor seeking income who rides to the rescue. A new breed of increasingly sophisticated savers, graduating from traditional deposit account investments, are taking a look at the trusts. Roddy Kohn of independent financial advisers Kohn Cougar, based in Bristol, says: "Investment trust income shares offer investors the opportunity to plan their financial needs creatively, by allowing them to control the level of risk and the amount of income to suit their personal circumstances."

In fact, as figures published by the Association of Investment Trust Companies (AITC) show, private investor funds going into income-orientated trusts have helped produce a significant difference in relative performance. The average discount - the difference between an investment trust's share price and the value of its underlying investments (its "net asset value") - on the investment trust sector as a whole has widened in the past four years from 3 per cent to 13 per cent.

But those trusts that combine their growth goals with a measure of increasing income distribution trade off much narrower discounts of 7 per cent. And those that put income growth at the top of their agenda have discounts of just 2 per cent to their net asset values. "This continues to show the versatility and strength of the sector and its suitability for private investors looking for additional income," says Michael Hart, director- general of the AITC.

At present, there are 21 trusts offering a combination of income and growth and another 12 focusing on higher income return. These tend to invest in UK shares and bonds that make high annual payouts.

Yields among high-income funds average 7.3 per cent. Some offer much more, including top performers such as Dartmoor and Abtrust High Income which yield 10.9 and 8.5 per cent respectively. And unlike traditional deposit accounts, investors have also seen growth in their original capital investment in recent years. Performance figures from Reuters show that pounds 1,000 invested three years ago would now be worth over pounds 1,690 if put into the Gartmore Scotland trust, or nearly pounds 1,660 in the Shires Income trust.

Investment trusts are easy to come by. You don't have to pay a visit to a stockbroker, although most are more than happy to help you pick out the ones most suitable for your investment needs. Increasingly popular are regular savings plans run by individual investment trust companies that allow you to invest through standing order or direct debit.

These are extremely flexible, and costs are low because scheme managers generally negotiate bulk-buy rates. This means they collect all the monthly buying orders from investors and put them through as one large deal to save money. Charges vary between the groups: some do not impose administrative costs on purchases, but levy a pounds 10 fee on sales.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
The 0 per cent introductory deals that credit cards offer are one of the most odious tricks

Beware credit card firms’ odious tricks

Why can’t we just have open and honest charges, without all the cross-subsiding?

The pound’s recent strength against the euro could be hit by economic uncertainty under a new government

How planning can make your travel cash go further

With the pound at a high against the euro, it pays to buy now before uncertainty post-election

Put the phone down on the coldcallers who see pension liberation as an opportunity to liberate your pension from you

Pension freedoms: How to deal with cold calls from scammers

Sean O'Grady offers advice on keeping your money safe
Switching to a better bank account is much easier than it used to be

More people are switching current accounts – but what do the figures mean?

Experts disagree about the 7% increase over the past year

The chance of getting what appears to be free money can be hugely attractive, especially to first-time buyers who can be fooled into thinking it’s extra cash to buy the essential new items they need for their dream home.

Beware the boom in cashback mortgage deals

Too many mortgages are being sold with misleading gimmicks

The firm’s revenues slumped by a third to £217 million in a disastrous 2014

Wonga results could get even worse this year, chief admits

The firm’s revenues slumped by a third to £217 million in 2014

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent

Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution

Make the most of your money in 2015-16: The end of the tax year is the beginning of the next...

The new tax year brings with it a raft of new rules and regulations

General Election 2015: Will pension reform be a major factor?

Video: Tom McPhail, head of pensions at Hargreaves Lansdown, says May's outcome could alter your pension

General election 2015: David Cameron's promise brings uncertainty to investors

Video: Simon Read talks to Fidelity's Tom Stevenson

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Operations Manager

    £30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

    Guru Careers: Stockbroker

    £Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Day In a Page

    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk
    Nepal earthquake: One man's desperate escape from Everest base camp after the disaster

    Escape from Everest base camp

    Nick Talbot was sitting in his tent when the tsunami of snow and rock hit. He was lucky to live, unlike his climbing partner just feet away...
    Adopting high fibre diet could dramatically cut risk of bowel cancer, says study

    What happened when 20 Americans swapped diets with 20 Africans?

    Innovative study in the US produces remarkable results
    Blake Lively and 'The Age of Adaline': Gossip Girl comes
of age

    Gossip girl comes of age

    Blake Lively is best known for playing an affluent teenager. Her role as a woman who is trapped forever at 29 is a greater challenge
    Goat cuisine: Kid meat is coming to Ocado

    Goat cuisine

    It's loved by chefs, ethical, low in fat and delicious. So, will kid meat give lamb a run for its money?
    14 best coat hooks

    Hang on: 14 best coat hooks

    Set the tone for the rest of your house with a stylish and functional coat rack in the hallway
    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?