Investing for growth: Take the market on trust

IF YOU don't have the time to build up your own collection of hand-picked shares, unit trusts and investment trusts are a lower-risk, affordable way to invest in the stock market.

Unit trusts and investment trusts are known as collective investments, although the way each operates is slightly different. As solid first-time buys, Tim Cockerill, investment director at Whitechurch Securities in Bristol, suggests the Gartmore Select European and Fidelity UK Growth unit trusts, and the Perpetual Income and Growth investment trusts. For first-time investors, he says unit trusts are generally considered lower risk than investment trusts.

If you need help to make a choice from the 336 investment trusts and 1,728 unit trusts, talk to an independent financial adviser. Independent Financial Advice Promotions (IFAP) will give you a list of three IFAs in your area. You won't pay for the advice but if you buy anything the IFA gets paid commission by the product provider. Fees for advice are built into the initial charge paid on most unit trusts but you'll pay much less if you make up your own mind about which unit trust you want and buy from a discount broker. The two organisations that represent investment trust and unit trust companies both produce free factsheets (see "contacts" at the foot of this article).

Don't rely on advertising claims. All figures quoted are for past performance and no one knows what will happen in the future. The experts judge a fund's performance by comparing it with industry-recognised benchmarks, such as the FT-SE 100.

If you are a first-time investor, an index-tracker unit trust is a good bet. Trackers are cheap, and they simply follow stock market indices. Over the past five years they have out-performed more than 90 per cent of managed unit trusts.You should not be paying more than 0.5 per cent a year in management charges. Go for a big fund; in general, the more money there is invested, the smaller the margin for error. Virgin and Legal & General offer huge All Share tracking funds.

You could also consider an open-ended investment company (Oeic). Launched in the UK in 1997, Oeics could eventually replace unit and investment trusts. They combine features of both because the size of the fund contracts and expands, like unit trusts, but they are quoted companies, like investment trusts. Their main advantage is that the price at which you buy and sell units is the same. They can also be more flexible because many operate umbrella funds, so if your investment aims change, you can easily switch funds.

Contacts: Unit Trust Information Service on 0181-207 1361, or the Association of Investment Trust Companies on 0171-431 5222. Financial Discounts Direct has a useful free booklet on how to use a discount broker, 0500 498 477 or IFA Promotion, 0117-971 1177; Legal & General, 0500 116622; Virgin, 0345 900900.

Start your day with The Independent, sign up for daily news emails
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
Life and Style
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own