Trading and Fund Documents · Investment Trusts

Buying an investment trust is an exchange transaction. The spread, order instruction and available liquidity can affect the price paid even when the investment thesis is unchanged.

Use an executable quote

The bid is the price at which a buyer may buy from you and the offer is the price at which a seller may sell to you, for the quoted size and conditions. A last traded price is a historical transaction rather than a promise that your order can use the same price.

Imagine a bid of 248p and an offer of 252p. Buying 400 shares at the offer costs £1,008 before fees. An immediate sale at the unchanged bid returns £992. The £16 gap is a trading cost even though the displayed midpoint remains 250p.

Choose the instruction deliberately

A market order prioritizes execution at available prices but does not fix the execution price. A buy limit specifies the highest acceptable price. It can execute below that limit, partially execute or remain unfilled. Broker capabilities and trading venue rules differ.

A 250p buy limit in the example need not trade while the offer is 252p. Raising the limit to obtain execution changes the decision. Do not confuse an unfilled order with a technical failure or a reason to abandon price discipline.

Include the whole transaction

Check commission, platform fees, currency conversion and any applicable transaction taxes. Small frequent trades can produce a high cost relative to the invested amount. Settlement and cash availability also follow the broker’s rules.

Before submitting an order, verify the share identifier, currency, units and quantity. Distinguish pounds from pence. A disciplined execution checklist protects the intended investment from a simple order entry mistake.

Try it yourself

You buy 300 shares at 410p and could immediately sell at 406p. What is the spread cost before other charges?

Show the worked answer

The difference is 4p per share. Across 300 shares it is 1,200p, or £12.

Further reading

Educational material, not a recommendation to buy or sell a fund. Numerical examples are hypothetical. This guide focuses on listed investment companies commonly called investment trusts in the UK. Product terms, access and tax treatment vary by jurisdiction.

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