Advisers' top questions about investment companies...and their answers

1 I can see that investment companies have performed better than open-ended funds over the long-term, but haven't they also been more volatile? The short answer is yes and there are two reasons for the additional volatility. First, investment companies may borrow money to invest (gearing), which magnifies both positive and negative returns. There's also a tendency for discounts to widen when markets do poorly and narrow when they do well, which exaggerates market moves. That's why investment companies are most suitable for long-term investors who can buy and hold through a market cycl...