The AIC have published an article explaining the importance of buying investment trusts when they are trading at a high discount. They say:
“Investing when the average investment trust discount is more than 10% may lead to significantly better returns over the subsequent five years, according to new research from the Association of Investment Companies (AIC).
The AIC’s analysis of investment trust returns since 2008 shows that when the average discount exceeded 10%, the average investment trust generated a return of 89.3% over the following five years. However, when the average discount was less than 5%, the average return was 56.1% over the next five years”.
In simple terms this is indicating that buying trusts when they are cheap in relation to their underlying assets, i.e. at a discount to Net Asset Value, is a good idea. Discounts tend to follow the mood of the market so being a contrarian is obviously helpful.
For the full AIC article see https://www.theaic.co.uk/aic/news/press-releases/double-digit-investment-trust-discounts-can-mean-higher-returns-over
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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