Here are some of the questions you need to consider to find out whether or not they are the right choice

Is an investment trust the right option for you?

If your answer is 'yes' to the following questions, you may be the right candidate for an investment trust.

1. Are you willing to take the risk of your investment dropping?

2. Are you going to be investing over the long haul?

You also want to ensure you have a good amount of savings that you can fall back on to ensure you can keep your investments in it for the long haul.

If you are someone who is seeking something much more short term or you aren't necessarily thrilled with the idea of putting your money in a risky situation, you don't want to go with an investment trust.

Picking the right Investment Trust

Here are some of the different things you should be looking for when you are choosing one:

1. Look where they invest

One of the key things you need to do is check  where they invest. After all, each Individually investment trust will invest in a different asset location and class.

For instance: "Investment Trust A" could limit the investment to primarily emerging markets in Asia. Whereas, "Investment Trust B" might  specialise in the property market in Europe.

2. Look at past performance

This is something that is largely debated in terms of the value it offers. After all, finding a fund with strong past performance isn't necessarily indicative of a strong performance in the future. That being said, finding one with a consistent record of above-average returns is usually a good predictor of future success, due to it's well managed record.

Keep in mind:

Last year's performance doesn't guarantee future success.

3. What are Absolute Returns?

These are returns that will show you how much a particular investment has managed to grow over a set period. For instance, if you have invested £1,000 and it's worth £1,200 after two years, the absolute return is 20%.

The only issue that you are going to run into when you are using absolute returns, is the fact they don't show whether or not an investment trust has decreased in value in any particular year.

For instance: £1,000 could double in total value in a single year, but then fall by as much as 50% in the second year down to £1,500. Therefore, it appears as if it had an absolute return of 50% over the two years when it didn't.

4. What are Annualised Returns?

These are the standardised ways to showcase how much an  investment trust has performed over several years.

This return value will give you the total average it has increased each year while taking into account that the balance would have increased based on earned interest already.

In the same case mentioned above, the annualised return would be 9.54%. Thus, if you placed your £1,000 in a savings account that paid out the same percentage with compound interest, it would have been worth £1,200 after 2 years.

5. Check out the Fund Manager

A fund manager is someone who has the final say in the placement of your investment. As a result, it is someone you should have a lot of confidence in, so check out his record and reputation before investing.

You can find their performance anywhere from the past 3 to 10 years directly on

Pro Tip: Ensure that the fund manager you are choosing has been in his/her current role for a significant length of time. New managers taking over any fund will have less meaningful performance metrics with insufficient data available to inspire confidence in their short term track record.

6. Check Their Risk Attitude

A lot of the trusts you may come across during research, will use 'gearing' to borrow money for leverage to chase higher returns. While this can easily increase profits when markets are in your favour, it can also make the risk of sustaining significant losses greater, when trading conditions go against you. Take Janus Henderson for example, the Henderson smaller companies share price is going to perform differently than one of their trusts that includes only Fortune 500 companies and this needs to be taken into account.

How can you monitor the performance of your Trust?

Valuation statistics are published every day and you can easily access live figures allowing real-time analysis.

One of the main figures you want to keep an eye on would be the Net Asset Value (NAV). This is the total value of all of the investment trust's assets per share.

Where to Track:

- Broker Account

- Investment Trust's Site

- Third-Party Tracking Websites

- Their Website

How do I sell shares in my trust?

If you are looking to sell your shares, you can offload them using the same brokerage account you bought them with. If they were purchased through a professional adviser, you can ask them to sell the shares for you.

If you would rather manage your trust online, you will be able to log in and sell them directly from your online account.

While some accounts will typically try to charge you an exit fee, there is a lot that will allow you to sell without paying anything.