What is an investment trust?
An investment trust is a public limited company. Its goal is to invest and generate a return for its shareholders, through the supervision of a fund manager.
Investment trust shares can be purchased and sold in stock exchanges, like with any other public company.
Because of this, there is a fixed amount of share capital and shares are not issued or cancelled depending on demand as units can be in other investment vehicles.
These shares, being stocks, can be traded as stocks by speculators. Their price is established throughout the day by the market.
Unlike common stocks, investment trust shares are an investment across several securities that are actively managed, generally focused on a specific industry, geographic market or sector that the fund manager is equipped to deal in.
Net Asset Value
The net asset value (NAV) is the total assets of the fund minus liabilities, divided by the number of shares for the fund in existence.
This can be calculated very easily, and is a good indicator of the health of the trust. But as share prices are subject to market fear and greed, the trusts shares can trade at a premium or a discount to its NAV.
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Category: Financial Glossary