Learning Zone FAQs

The main differences between saving and investing are the potential your money has to grow and the risk you take on. 

When you save, your money stays in a bank account or cash ISA where it will usually earn  interest. Over time, this often means that the real value of your money falls because the interest you earn isn’t enough to keep pace with inflation. 

With investing, you put your money into assets. These assets have the potential to grow in value, and give you a higher return than savings - helping you beat inflation. But there is also the risk that the assets will fall in value and you’ll make a loss on your money. 
In summary, saving may be good for shorter term goals where you need to prioritise safety over growth. If you want your money to have a greater chance of growing, and are willing to accept some risk, investing may be a better fit.

Risk is the possibility that your investment could lose value, either in the short term or permanently. Typically, higher risk assets have the potential for higher reward, while lower risk assets may offer smaller but more stable returns.

Risk is important because it helps you decide whether you can afford a certain investment, and whether you’re comfortable with the ups and downs that may come with it. 

All investments carry some risk, but managing it carefully - for example by diversifying across different asset types - can help balance the potential for losses with the chance for gains.

Your risk appetite is how much risk you’re comfortable taking with your money. The best way to understand your risk appetite is to speak to an expert, such as a financial adviser. They’ll ask you about things like how you might react if the value of your investments suddenly fell or how long your time horizons are.

Market volatility is how much and how quickly investment prices move up and down. High volatility means prices are changing a lot in a short period, while low volatility means they’re moving steadily. 

Volatility is a normal part of investing because markets respond to news, economic conditions, and how investors are feeling. It might feel unsettling in the moment and cause short-term losses. But, on some occasions, it can also open up new opportunities. For example, a fall in prices may provide the chance to buy good-quality investments at lower prices. 

The key is not to panic during market swings and to stay focused on what you want long term.

It’s never too early or too late to begin investing. The earlier you start, the more time your money has to benefit from long-term growth and the power of compounding (where growth builds on itself over time). 

Even starting late can still make a difference, though. The key is to understand your risk appetite, begin when you feel comfortable, and stay invested for as long as is possible for you.

Active management is when a professional fund manager uses their skill, knowledge and experience to select investments they believe will do better than the market. They also all decide when the best time is to sell those investments. This is in contrast to passive investing, which simply follows an index. The aim of active management is to outperform the stock market, rather than just follow it.

Generally, it’s recommended that you invest with a timeline of at least five years - known as long-term investing.

Long-term investing gives your investments more time to grow. It also helps to smooth out short-term market ups and downs, addressing some of the stomach churning volatility that comes with much shorter timelines. 

Compounding is another advantage. Over time your returns are reinvested, causing exponential growth as long as you’re invested.

When we talk about compounding in investing, we’re usually referring to compounding returns. This is where the money that you make from your investments is reinvested, adding to your initial investment and  allowing you to generate even more returns. 

Think of it as a snowball effect. The longer you’re invested, the more potential returns you have to reinvest. The more money you reinvest, the more potential returns you could earn, and so on.

Income investing aims to give you regular cash payments. This can be useful for people who value stability over higher returns and want to supplement their income - people who are retired, for example. 

Growth investing, on the other hand, focuses solely on increasing the value of your investment over time. But you can combine the two, growth and income, in some investment funds.

Diversification is where you spread your money across different investments – this could be different assets, sectors or regions. It makes sure you don’t have all your eggs in one basket, to reduce the risk of big losses.

If you’re invested in lots of different things, then if one investment does badly and you make a loss, others may do better which helps to protect your portfolio overall.

It sounds like an obvious strategy, but one that can be tricky to put into practice. The more investments you have, the more time you have to spend researching, selecting and balancing them all. This is where getting expert support can be helpful.

Simply put, global equities are shares in companies from all around the world. Investing globally gives you access to a wider range of opportunities and industries, some of which may not be available in your home market. 

It also spreads your risk by reducing dependence on the economic performance of a single country. For example, if the UK economy slows, global shares from the US, Europe, or Asia could still perform well.

A multi-manager strategy is when your money is invested by several different investment managers instead of just one. 

Multi-manager strategies tend to  increase opportunity and spread risk - because if one manager’s investment style isn’t as successful at a given time, another may make up for it. It also means you’re benefiting from more experience, knowledge of the market, and insight.

Investment trusts were first created in the 1800s in Britain, as a way for everyday investors to gain access to a wider range of investments. 

Investment trusts are actually a type of company. So, when you invest in the trust, you buy shares in the company and your money is pooled with many other investors’. Professional managers employed by the trust will then choose where to invest that money on your behalf.

These managers will buy a range of investments, in the hope that they’ll increase in value - giving you and the other investors a return on your investment.

A fund is a pool of investments that you can buy units in. An investment trust is a company whose shares you buy on the stock market. This means trusts have some benefits that funds don’t have access to, like being able to borrow money to invest.

Investment trusts have quite a few advantages: 

Firstly, they offer access to a wide range of investments in one place - some of which are only accessible through investment trusts. 

Investment trusts are also actively managed, so that you always have experts selecting and keeping an eye on your investments. 

Their independent board structure adds an extra layer of protection too. The board’s job is to hold its fund managers accountable and make sure the trust is always acting in the best interests of its investors.

Investors have a bit more flexibility with investment trusts, because their shares are listed on the stock exchange. This makes the shares slightly easier to buy and sell. It also means that investors can buy the shares at a discount (cheaper than the value of the assets) or at a premium (more expensive), which creates opportunities for investors.

Unlike open-ended funds, an investment trust doesn’t have to sell its investments if lots of people want to take their money back at the same time. As a result, the fund managers can take a longer-term view. They can also use borrowing (known as gearing) to try and boost returns when the outlook is strong - although this can also reduce returns if there’s a downturn. 

Finally, investment trusts tend to pay out larger, more regular dividends compared to other types of fund. 

Altogether, investment trusts combine flexibility, professional management, and potential for long-term growth.

Investment trusts have a reputation for being good for income. This is because, when you invest for income, you generally want investments that don’t have lots of risk and instability, but will still aim for reliable returns. Investment trusts can be particularly suited to this because they’re diversified by default, which spreads risk. 

Plus, many investment trusts aim to pay regular dividends. Some can even hold back a portion of income in stronger years to create reserves. These reserves can then be used so that you still receive a reliable dividend, even in more challenging times.

There are two main ways to buy shares in an investment trust. The first way is direct, through an investment platform. Some examples of investment platforms are AJ Bell or interactive investor, but there are many to choose from - each with their own appeal.

The other way is through a third-party, like a stockbroker or financial adviser. A financial adviser can give you guidance and help ensure you’re marking the right choice for your specific needs.

Yes. You can invest in an investment trust through tax-efficient “wrappers” like an ISA (Individual Savings Account), JISA (Junior ISA), or LISA (Lifetime ISA). These accounts let you invest up to £20,000 each year without having to pay UK income tax or capital gains tax on your returns. This means you can keep more of what your investment earns. 

A JISA helps save for a child’s future, while a LISA can support first-home buying or retirement. 

You can invest either through a financial adviser or directly using an investment platform or provider, depending on what suits you best.

A dividend is a payment that some companies make to their shareholders, usually taken from their profits. Think of it as a way of rewarding investors for owning shares - and sharing their success. The amount you receive depends on how many shares you own, and dividends can be taken as cash or reinvested to buy more shares.

Dividends provide investors with a steady stream of income, which can be especially valuable in retirement or if you want to boost your current earnings. Unlike shares, where you have to sell them to receive a payment in return, dividends allow you to receive payments while still holding onto your shares. Over time, dividends can also make up a significant part of your investment return.

In some cases, dividends can also be a more tax efficient way to grow your money. Certain types, particularly qualified dividends, have lower tax rates than other types of income for instance.

Yes. This can be useful for investors who want both the potential for long-term growth and a reliable income stream.

A dividend reinvestment plan (sometimes called a DRIP) lets you use your dividend payments to automatically buy more shares instead of receiving cash. This can be a powerful way to grow your investment over time because you benefit from compounding - the process of reinvesting earnings to generate even more returns in the future. It’s often an easy and low cost way to steadily increase your shareholding without needing to invest more money yourself.

Dividend yield is a measure of how much income you receive from dividends compared to the current share price. It’s expressed as a percentage and helps you understand how much return you’re getting in the form of income. For example, if a share costs £100 and pays £5 dividends each year, the yield is 5%. 

Comparing yields between investments can help you judge which might provide better income. But be careful - it’s important to consider other factors too, like risk, and to look for a steady option that’s aligned to your goals.

A dividend hero is the name given to investment trusts that have increased their dividends every year for at least 20 consecutive years. It’s often awarded to large, established and financially stable companies. This long record shows a commitment to delivering income to shareholders and suggests the trust has been able to manage its investments well across different market conditions.

At Alliance Witan we have an elite, handpicked team of fund managers from all around the world. We’ve chosen the fund managers at Alliance Witan because they each bring their own distinct but complementary investment style. 

Because they invest actively, they may change what they invest in over time. They’re always on the lookout for stocks that can provide better returns. So, when an opportunity arises, they may sell an underperforming stock and invest in one with higher return potential. 

The main investment manager (in our case WTW) also reviews these decisions to make sure they align with the trust’s long-term objectives.

The trust invests in many different types of companies from all over the world. They could be big or small. And from a variety of sectors, like technology or utilities. The managers simply choose what stocks they think will perform best.

We manage risk by building in layers of diversification. For a start, we have different fund managers which each bring their own style. Then each fund manager spreads their investments across a wide range of companies, industries and regions. So, if one area or manager performs poorly, others may do better, helping to balance overall returns. We also closely monitor the trust to ensure it doesn’t take on any excessive risk while still aiming for good returns.

Just as you would with an investment fund, you can invest in the trust either through a financial adviser or through something called an investment platform. Some examples of platforms are AJ Bell or interactive investor, but there are many more to choose from. Terms and charges will vary from platform to platform though, so best to brush up before you buy.

If you want to withdraw money, you can at any time. Just instruct your adviser or log in to your platform account and let them know you'd like to receive your money. It usually takes a few days to land in your account once they've received your request.

If you’ve signed up for regular emails from us, you’ll receive monthly factsheets that outline the performance of the trust as well as a quarterly newsletter which has a portfolio update. You can also find lots of information in the document section of our website. Otherwise, you can ask your adviser at any time about your investments or log in to your platform account.

There are costs involved in investing, such as management fees and other expenses. At Alliance Witan, we publish these clearly in our reports and on our website so you know exactly what you are paying. Costs cover professional management, research, and administration of the trust. The aim is to keep charges competitive while ensuring you receive the benefit of experienced investment management and a well-diversified portfolio.