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Roaring 40s

There are periods when growth funds, as defined by the average UK equity unit trust, sometimes marginally outperform the average UK income unit trust but this is not true over the longer term.

In any event, income trusts are much safer than growth trusts and a little less volatile, especially in times like the present when markets are comparatively high and liable to some corrections. Income shares are more protected by reason of their dividends.

Figures for the 10 years to September 1 show that the average income unit trust has risen by 127 per cent and the average growth trust by 87.9 per cent – a difference of almost 40 per cent.

The five highestperforming growth trusts have outperformed the best income trust, Invesco Perpetual income and 24 income trusts have outperformed the lowest growth trust, which rose by 52.5 per cent compared with only 10.5 per cent for the worst-performing growth trust.

Furthermore, the better managed income trusts are consistent. Invesco Perpetual income, for example, rose by 246 per cent over the past 10 years compared with 342 per cent for GAM UK diversified. Over three years, however, Invesco Perpetual was up by 76.8 per cent against 37.2 per cent for the GAM trust.

At present, there are two managers I particularly like. The first is Tony Nutt of Jupiter income, whose recent performance has been only average but who is outstanding over the longer term, both in rising and falling markets.

I also like Bill Mott who recently took advantage of the low prices of financial shares by increasing the weighting of his PSigma income fund to 25 per cent in banks and 10 per cent in insurance companies.

Income unit trusts are ideal for those who are retired, for self-invested personal pensions and for trustees.


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