Investment trusts for income and growth: Options for business owners
Running a business often means your money is tied up in stock, payroll, and day-to-day operations. But when you’re a business owner, it’s just as important to think about your financial future. Building wealth outside your company not only creates a safety net but also ensures you’re not relying solely on the sale of your business to fund retirement.
That’s where investment trusts can come into play. For over 150 years, investment trusts have been used as a way to grow and protect wealth. They combine professional management with flexibility, and for business owners seeking income, growth, or both, they offer a wide range of opportunities.
In this post, we’ll explain what investment trusts are, why they can be attractive to business owners, and how they might fit into your overall strategy for income and long-term growth.
What is an investment trust?
Investment trusts are companies listed on the stock exchange that invest in a diversified portfolio of assets—such as shares, property, or bonds—on behalf of their shareholders. When you buy shares in an investment trust, you’re effectively pooling your money with other investors.
The trust is managed by a professional team, who decide where to invest based on the trust’s objectives. Some focus on delivering steady income through dividends, while others prioritise capital growth.
For business owners, the appeal lies in three things: diversification, professional management, and the potential to generate income alongside long-term gains.
Why business owners should consider investment trusts
1. Diversification beyond your business
Many entrepreneurs have most of their wealth tied up in their company. That’s a high level of concentration risk. Investment trusts allow you to spread your money across different sectors and geographies, reducing reliance on a single source of income.
2. Reliable income streams
Some investment trusts are designed to pay steady dividends, making them particularly attractive if you want supplementary income. Business owners who pay themselves modest salaries may use these dividends to top up personal income.
3. Long-term growth
Others focus on capital growth—ideal if you’re planning for retirement or a big future purchase. This can complement the growth of your business, giving you an extra pot of wealth working in the background.
4. Professional oversight
Running a business demands time and energy. With an investment trust, you can delegate portfolio management to professionals while still having the flexibility to choose a trust aligned with your goals.
5. Liquidity and flexibility
Unlike property or some private investments, investment trusts are traded on stock exchanges. You can usually buy and sell shares quickly, which suits business owners who may need flexibility.
Types of investment trusts for income and growth
Income-focused trusts
These trusts prioritise paying dividends. They often invest in established companies with strong track records of distributing profits. Some well-known examples have paid rising dividends for decades.
- Best for: Owners who want regular cash flow to supplement their salary or cover personal expenses.
- Consideration: Dividend yields can vary, and past performance doesn’t guarantee the future.
Growth-focused trusts
Growth trusts reinvest profits rather than paying high dividends. They target businesses or sectors with strong potential for appreciation, such as technology, healthcare, or emerging markets.
- Best for: Entrepreneurs with a long-term horizon who want wealth to compound.
- Consideration: Growth trusts may be more volatile, so patience is required.
Balanced trusts
Some investment trusts aim to deliver a mix of income and growth. These can be an ideal compromise if you want both regular payouts and long-term appreciation.
- Best for: Business owners who value steady income today but also want their capital to grow over time.
Case study: How a business owner might use investment trusts
Imagine Sarah, who runs a successful design agency. Most of her wealth is tied up in her company. She wants to:
- Generate additional income for personal expenses.
- Build a retirement pot independent of her business.
Sarah invests in two trusts:
- An income-focused investment trust that provides quarterly dividends. This supplements her modest salary.
- A growth-focused trust that targets global equities, aiming to build long-term capital.
By combining both, she diversifies beyond her company, creates a reliable income stream, and builds wealth for the future—all without having to actively manage her portfolio day to day.
Advantages of investment trusts
- Dividend reserves – Unlike funds, investment trusts can hold back profits in good years to pay dividends in leaner years, offering stability.
- Compounding growth – Reinvested dividends and long-term growth strategies can significantly increase wealth over time.
- Transparency – As listed companies, they publish regular reports, giving you insight into performance and holdings.
- Access to specialists – Many trusts are managed by expert teams with deep knowledge of niche sectors.
Risks to be aware of
No investment is without risk. With investment trusts, you should consider:
- Market volatility – The value of trust shares can rise and fall, sometimes more than the underlying assets.
- Discounts and premiums – Trusts may trade at a discount (below the value of their assets) or a premium (above it), which affects buying and selling prices.
- Sector risk – If you pick a trust heavily focused on one industry, poor performance in that sector could hit returns.
- Liquidity in smaller trusts – Some trusts are less frequently traded, meaning it may take longer to buy or sell shares.
Business owners should view these risks in the context of their broader financial situation and time horizon.
How to get started
- Clarify your goals – Do you want income, growth, or both?
- Research trusts – Look at their track record, dividend history, management team, and fees.
- Choose a platform – Many UK investment platforms let you buy investment trust shares through a Stocks & Shares ISA or pension for tax efficiency.
- Start small and diversify – You don’t need to invest large sums right away. A mix of trusts can provide balance.
- Review periodically – Check performance annually, but avoid overreacting to short-term swings.
For business owners, investment trusts offer a practical way to diversify wealth, generate reliable income, and achieve long-term growth outside the business. Whether you choose an income-focused, growth-oriented, or balanced trust, the key is aligning your investments with your personal financial goals.
Your business might be your greatest asset today, but building wealth beyond it ensures you have options, security, and financial freedom tomorrow. Investment trusts can be a powerful tool to make that happen.