Ever wondered how an investment trust discount works? Or what a split cap trust is? Kyle Caldwell runs through a glossary of all the key terms you need to know.
What is a discount and why is it an opportunity for investors? A discount is when the share price of an investment company is lower than the net asset value (NAV) – the underlying investments held by the company. The discount is a percentage of the NAV. For instance, if the NAV is 100p and the share price is 80p then the discount is 20%. Many investors see investment companies trading on wide discounts as a buying opportunity. Investors buy into an investment company on a discount in expectation it will narrow, as subsequently this enhances returns. If in the above example th...
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