What is an investment trust? – For beginner investors

Investment trust fund 投資信託ファンド:

投資 (toshi) in Sino-Vietnamese means INVEST MENT (INVESTMENT).

INVEST means “to put into, to drop into”, MENT means “wealth, capital”

信託 (shintaku) in Sino-Vietnamese means TÍN THÁC (TRUST).

TÍN means “to believe, to trust”, THÁC means “to entrust, to delegate”

Therefore, an investment trust means you don’t buy or invest in individual stocks yourself, but you trust and entrust an investment entity to buy a collection of multiple stocks on your behalf. It’s like handing it over to experts to help you invest and manage it for you.

For example, if you want to invest in the technology sector, instead of spending 20,000 yen (2 man) to buy 1 NVIDIA stock, 30,000 yen (3 man) for 1 Apple stock, and 50,000 yen (5 man) for 1 Microsoft stock, you can simply spend 10,000 yen (1 man) to buy a tech investment trust stock that gives you a fraction of NVIDIA, Apple, Microsoft, and “500 other tech companies in the stock market” (the specific number depends on the fund you choose).

The biggest beauty and advantage of an investment trust is that you can start investing with a tiny amount of capital and accumulate it gradually. In Japan, you can start investing with just 100 yen.

The second beauty and advantage is that you will always successfully buy an investment trust whenever you make a purchase. Because they wait for the market to close before quoting a price, when you buy, the price is fixed. In contrast, when buying individual stocks, your buy order must match the price and there must be enough shares being offered in the market for you to buy.

The third beauty and advantage is that investment trusts are quite stable, meant for long-term investments of 10 years or more. The value goes up slowly but surely.

Because of these reasons, investment trusts are very suitable for beginner investors. And most people, no matter how long they have been investing, will still keep investing in investment trusts because they are quite stable.

The downside of investment trusts is that because they are stable, the profits are not huge, and sometimes you will incur losses when the market goes down. But since we invest long-term, when you see a loss in value, don’t sell, ignore it, and just leave it there waiting for it to go up.

Another point to note is that investment trusts incur fees because they need human resources behind the scenes to manage the investments for you. But for me, that’s not a problem; if my investment account makes a profit from the fund, paying them is a matter of course.

I have shared 3 funds I usually buy here (Click to view)

Plus 2 funds I bought recently, which pay dividends monthly. I will share more about these two later.

Hope my sharing is helpful! Wishing you a steadfast mind in investing even if you are just starting out. Great things come from small beginnings!