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2020’s investment trust winners: time to take profits?

Biotech trust Trump benefit may be shortlived

2020’s investment trust winners: time to take profits?

December 30, 2020
By Dave Baxter

The enormous sell-off that took hold in February and March was swiftly followed by a fierce rally that has come to dominate much of the year. MSCI World index rose by nearly 40 per cent in sterling terms between the start of April and mid-December. As of mid-December the index had made a year-to-date gain of 12.6 per cent.

The stock market’s biggest winners have enjoyed even greater returns and many investment trust shares, which tend to be more volatile than markets, are among them. Approximately 70 trusts have made share price gains of at least 20 per cent for 2020, as of 14 December.

While this is good news for investors at the end of a challenging year, it raises the question of whether now is the time to take some profit or even sell out entirely…

The tech trade

Some 15 trusts with a focus on China or Asia, including single-country funds, have made share price gains of at least 20 per cent, in part reflecting the strong performance of Chinese stocks. But the prominence of this cohort, and trusts with a global or US focus, often stems from the huge wins made by tech majors in the pandemic…

When it comes to areas like tech, James Carthew, head of investment company research at QuotedData, suggests that investors assess investment trusts’ biggest holdings on a case-by-case basis, given that not all companies will keep up the momentum of this year. Some have concerns that this year’s events have pulled forward growth for names such as Netflix (US:NFLX), for example, while others worry about how Zoom will navigate a post-pandemic future. Your view on a portfolio’s major holdings may instruct a decision on whether to take profits…

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