Popularity of Unit Trusts?

[Muddywaters]

I think it is down to inexperienced investors seeking advice. They are invariably directed towards comission paying investments, from which the advisor will benefit. There is also the power of advertising to contend with. Most of the adverts in the "Money" sections of the weekend papers, as opposed to the "Business" sections, are for funds, occasionally for ITs. The editorial items about investing invariably use fund managers, who tend to promote their own and similar products.

TJH

What kind of commission does a unit trust pay compared to an investment trust to advisers? What would an adviser get for say Fundsmith as opposed to say Scottish Mortgage?

[tjh290633]

Investment trusts do not pay commission. Open ended funds do, but it depends on the class of share and whether the customer has opted to pay it nowadays.

TJH

[scrumpyjack]

Investment Trusts don't pay any commission to advisers. It is not normally the Investment Trust that is selling the shares. If you buy IT shares you are buying shares that an existing shareholder is selling, though there may be occasions where an IT sells new shares onto the market if the SP is not less than NAV or buys them back from the market if the SP is less than NAV.

The absence of kickbacks (sorry - commission) is one reason that advisers and platforms push unit trusts and somehow forget to mention ITs

[scrumpyjack]

It's called a platform charge now

[DrGuid]

I'm mostly in unit trusts. On Hargreaves Lansdown you can buy a minimum order of £100 worth of units in any trust so it's a great way to diversify a smaller portfolio as the dividend payments come in.

There are plenty of cracking unit trusts available if you have the time to research them.

Also there is of course no dealing charge on most of them and not many have a bid/offer spread.

I've started buying individual stocks but unit trusts are still my core holdings.

Some people like that you can buy either Accumulation or Income units. I always buy income units as I love getting dividends. Also there are quite a lot of monthly income payers - I'm not sure how many IT's pay out on a monthly basis.

I've got so many different dividend payers now that I can reinvest my income on a fortnightly basis .