Investment trusts and companies can borrow to enhance their performance, something that is not possible for unit trusts. This borrowing, known as ‘gearing’, may be in the form of loans, preference shares, debentures or bank facilities. The aim is always the same: to make a greater return for the shareholders.
Gearing is designed to benefit the investor, but if the trust manager makes a wrong decision, the gearing will work in the opposite direction to reduce gains or even increase losses.Last Updated
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Investment trusts and investment companies
03: Gearing
The value of your investments - and the income from them - can fluctuate and it is possible that you might not get back a significant amount of your investment. Past performance is not a guide to future performance and may not be repeated.
