Unlike listed shares and securities, many alternative assets do not have a precise market value. Though the methodologies used to value them are robust and well-established, they can only be an approximation and, where assets are illiquid, they may only be valued on a quarterly basis.
Investment companies investing in alternative asset classes will often use gearing. This can help to boost your immediate income and long-term capital growth, but will also increase any losses that you might make.
In recent times, due to the fall in interest rates, many income-orientated investment companies are standing ‘at a premium’. This means that you are paying more for the shares than the value of the underlying assets. This may be a price you are prepared to pay for an attractive level of income, but you should bear in mind that, over time (e.g. if interest rates rise), these premiums may fall and could move to a discount. This means that the share price performance will be worse than that of the portfolio, and could increase any losses you make.
An independent financial adviser can help identify alternatives that best fit your needs and risk profile
Investment companies are long-term investments and you should be prepared to hold them for at least 5 years, and preferably 10 or longer
Visit the AIC website to learn more about investment companies, find and compare companies and create your own ‘Watchlist’.
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This document is for information only and does not constitute investment advice or a personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment mentioned here. The Association of Investment Companies has taken all reasonable steps to verify the information contained in this document, but does not accept responsibility for any errors or omissions or for losses of any nature incurred by any person acting or refraining from action in reliance on such information. This document may not be printed, reproduced or further distributed to any other person or published, in whole or in part, for any purpose.
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