What are investment trusts (ITs) and how do they work?

Investment trusts are companies that invest in the shares of other companies. They are a popular way of investing for income, growth or both.

The money you invest is pooled with that of other investors and a professional fund manager then buys shares in a wider range of companies than most individual shareholders would have access to. By pooling money and investing this way even people with small amounts of money can gain exposure to a diverse and professionally run portfolio of shares, spreading the risk of stockmarket investment.

Trusts often specialise in particular sectors and types of company such as communications or alternative energy producers. Others specialise in companies from different parts of the world. There are over 300 investment trusts responsible for the management of billions of pounds worth of assets on behalf of investors.