So this is the time to take profits on UK-focused investment companies, and especially those with smaller company remits. These may continue to do well, since the UK GDP is now split 80:20 in favour of services, rather than manufacturers, but a good rule of thumb for investment is “better safe than sorry”. And it is hard to believe that the Conservatives can do anything but lose the next election, and a return to our 1950s socialist past will not be good for business, large or small.
Fortunately, investment companies with global remits have also done well over the years, as Table 1 shows.
These are all AIC ‘dividend heroes’, with at least 20 years of consecutive dividend increases. Baillie Gifford, with its meritocratic partnership structure, is riding high at the moment as a manager. Generally, however, it is best not to buy investment companies at a premium to the net asset value, as these rarely last.
And as stated above by Ms Brodie-Smith, look at the portfolio composition of the chosen trust, as well as the accord between the board of directors and investment manager. All have interesting ideas as to their structure, investment remit, and way of reducing the equity risk element. But when things are bad, a solid and rising dividend is a great comfort to investors.
