Bankers investment trust is a type of collective investment scheme where investors pool their money into a fund, which is then invested and professionally managed by the fund manager. It provides investors exposure to a diversified portfolio of assets like stocks, bonds etc. This allows retail investors to invest small amounts and still enjoy the benefit of diversification. Some key benefits of bankers investment trust are professional fund management, diversification, liquidity, transparency, lower costs compared to directly investing in the markets.
Wide range of assets classes for diversification
Bankers investment trusts invest across a wide range of assets like equities, fixed income securities, money market instruments etc. This allows constructing a properly allocated multi-asset portfolio catering to an investors risk tolerance and investment horizon. A typical balanced fund from a banker’s investment trust family will have 40-60% allocation to equities with the rest going into fixed income, gold, cash instruments etc. This ensures optimal risk-adjusted returns.
Lower costs compared to direct investment
Bankers investment trusts leverage economies of scale to reduce costs for investors. Expenses like administration, trading, research, audit etc are spread across a large asset pool, bringing down the costs per investor. Typically the Total Expense Ratio (TER) for a bankers investment trust fund would be 0.5-1% p.a. whereas stock trading commissions for retail investors can be upto 0.5% per trade. Over long term, these savings from lower investment expenses can contribute significantly to higher net returns.
In summary, key benefits that banker’s investment trusts offer to retail investors include – professional management, diversification, liquidity, transparency, and lower costs which can really boost long term returns from the overall investment portfolio