We all know the benefits of investing for the long term and this is something investment companies specialise in. This year marks 154 years since the launch of the first investment company, F&C Investment Trust (FCIT), and there are now 25 investment companies that are over 100 years old.
Today there are hundreds of investment companies to choose from and industry assets currently stand at £262bn. But how do you decide if an investment company is right for you? And how should you choose one? The answers depend on whether you are looking for income, growth or a combination of the two – as well as your circumstances and appetite for risk.
Past performance is no guide to future returns, but it’s obviously something to be considered. When looking at performance data, it makes sense to look at a variety of time periods and performance for individual years to give a clearer picture of how a company has performed in different market conditions.
Investment companies invest in a diverse range of assets and the AIC provides a wealth of information to help investors along the way. Its recently redeveloped website, www.theaic.co.uk, offers performance data, as well as information on gearing (borrowing), discounts/premiums, dividends, charges, environmental, social and governance disclosures, and portfolio and management information. You can even download the latest factsheet and annual report of an investment company.
Investment companies have an unrivalled dividend track record. This is because they have the flexibility to retain some of the income they receive in good years and use it to boost dividends in leaner ones. Known as dividend smoothing, this has enabled many investment companies to increase their dividends through both good and bad times. Although dividends are never guaranteed, investment companies have consistently increased their dividends over multiple decades and through times of market stress. There are 17 ‘dividend hero’ investment companies that have increased their dividends each year for 20 years or longer. Seven of the dividend heroes have consecutively increased their dividends for 50 years or more.
The investment company structure lends itself well to innovation, as the growth of specialist sectors in areas such as renewable energy, growth capital, infrastructure and specialist property demonstrates. In addition, some companies are using specialist investment strategies that are difficult to replicate elsewhere, such as in private equity and venture capital trusts (VCTs). If you are looking for a company that’s a bit different, the investment company sector offers a good deal of choice. But there are plenty more mainstream investment companies too, which invest in areas such as the UK or global equities.
The past 154 years have seen two World Wars, the Great Depression, the tech boom (and bust), the 2008-09 financial crisis, the Covid-19 pandemic and the current cost of living crisis. We never know what’s around the corner, but investment companies’ 154-year history demonstrates the strength and durability of their structure, which is just as relevant for today’s investors.
For more information on investment companies, visit www.theaic.co.uk
To enter the prize draw for the chance to win £5,000 to invest in an investment company of your choice, answer the following question:
How many dividend hero investment companies are there?
- 20
- 17
- 15
The Association of Investment Companies (AIC) would like the opportunity to contact you by email to send you its investment company newsletter, Compass. Please read the options below and tick where appropriate.
For full terms and conditions see investorschronicle.co.uk/prizedrawterms
Issued by the Association of Investment Companies (AIC). All entries to this competition must be received by 9 December 2022. The winner will be the first correct entry drawn at random following the closing date for entries. The winner’s prize will be paid by bank transfer only. Only one entry per person is admitted. This offer is only open to UK residents aged 18 years or over and excludes employees of the AIC, connected companies, their agents or their families, or anyone connected with the competition. The judge’s decision is final. Investment companies are equities whose value can go down as well as up and you may not get back the full amount invested. Past performance is not a guide to future performance. If you are in any doubt about whether an investment company is suitable for you, you should consult a financial adviser.
