The investment trusts are designed as a collective investment company. These trusts are involved in investment activities like investing in the stocks of different companies and many more. These trusts are registered on the stock exchanges. Like the mutual funds or the unit trusts, the investment trusts also depend on the investors for their funds.
Role of Fund Managers in Investment Trusts
A large number of investors invest in these trusts and their money is pooled together. To provide the investors with the opportunity to invest in the trust, limited units of shares are offered to the investors. Now, this money is handled by an experienced fund manager who has the necessary knowledge about the sector.
For the purpose, the fund manager remains concerned about the development of a wide range of business organizations.
The collected money is then invested in a planned way in those shares where the money can grow more rapidly but at the same time, it would remain comparatively safe. The fund managers are the key figures in the investment trusts and so the fund managers are selected very carefully by the board of directors.
Types of Investment Trust
The investment trusts can be divided in two types according to their choice of investment. The first one of these types is the traditional type of investment trust. These type of trusts are only interested in investing in a single type of share. On the other hand, there are the split capital investment trusts. These trusts invest their money in different type of shares. These types of trusts are designed for a period of maximum ten years.
Diversity and Risk Factor related to Investment Trusts
The investment trusts are type of collective investment and these investments are safer than the other forms of investments. As the investments are diversified, money is invested in more than one type of share and it is not exposed to the risks related to the investment sector. The investment trusts invest in a number of companies from different sectors to manage the systematic risk. At the same time, these investments can be done at very low prices.
Last Updated on : 1st July 2013