Investment Trusts

Definition

An investment trust is a company that raises money from shareholders and invests those funds in a diversified way across various assets such as stocks, bonds, property etc., with an aim to generate profits and income for its shareholders.

Analogy

Imagine an investment trust as being like a chef who uses different ingredients (investments) to create a delicious meal (profit). You pay for your portion of the meal (shares), trusting that the chef knows how best to combine everything together.

Related terms

Portfolio Diversification: This refers to spreading investments across various types of assets or sectors so as not put all eggs in one basket - reducing risk while maximizing returns.

Dividends: These are portions of earnings distributed by corporations or trusts among their shareholders.

Asset Allocation: This refers to dividing an investment portfolio among different asset categories such as stocks, bonds and cash equivalents based on investor's goals, risk tolerance and investment horizon.