The No.1 rule when buying investment trusts

Unlike ETFs, investment trusts often trade at a discount to their net asset values. That means you can lose a lot of money. But it doesn't have to be this way.

Investment trusts can trade at a discount to the sum of their parts. In other words, you can buy them for less than their net asset value (NAV).

Contrast this with exchange-traded funds (ETFs). Whether the assets it holds are rising or falling, that ETF will always trade at its NAV. The profit opportunity here is linear. If the fund's holdings rise, the fund's value rises in lockstep.

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Theo Casey

Theo is a former financial writer and editor, having written for reputable titles such as Euromoney Institutional Investor and Redwood Publishing. He has also appeared on-screen with Al Jazeera, BBC and CNBC and on MoneyWeek Theo covered funds, share tips and stockmarkets. He also edited the country's oldest newsletter with Lord Rees-Mogg for four years. Theo now runs his own content marketing agency for financial companies, and he is a seasoned CISI-qualified investment adviser.