I’ve always considered investment trusts to be among the very best long-term defensive investments. There’s a couple of key reasons.
One is that, unlike handing over money to typical fund managers, there’s no conflict of interest. Fund managers are answerable to their bosses, to the companies they work for. They’re there to maximise the size of the slice taken by the company’s owners. But when they’re working for investment trusts, that’s you, me, the people who stump up the cash. When we invest by buying shares in an investment trust, we become the owners.
The other key thing I like about investment trusts is the way they’re allowed to handle dividends. Cash on the books can be accumulated during good spells and is handed out as extra during tougher years. And experience shows that the top trusts manage their cash flow and their dividends in a conservative and sustainable way.… Read more