I didn't think I was quite so dumb, but it seems I might be. I had always thought that the spread for shares was measured in a few percentage points and thought this was one of the points of clarity that makes investment trusts an attractive investment. I had bought Blue Planet IT 1 shares within my Alliance Trust SIPP and it seems that the spread on Blue Planet is huge - within minutes of dealing I obtained quotes of 'Buy at 170, sell at 30'. I had never thought that such a gap existed and would never have thought of checking what the spread was. Yet there may be reasons why such a gap exists. I cannot understand it.

Bryan Wilson
Via e-mail

Angus Rigby replies: Investment trusts are traded on the stock market, and as with any listed investment the share price will vary with supply and demand. The bid and offer price are set by market-makers and the difference between these two - the 'spread' - is determined by the stock's liquidity. Illiquid stocks, i.e. those that are not traded frequently, will generally have large spreads, as it can be difficult for the market-maker to find someone to take the opposing side of a trade. They can also be subject to dramatic price movements as the result of an increase in trading activity.

As the share prices and spreads of illiquid stocks can fluctuate significantly within short time periods, investors should be aware that it may not always be possible to sell an illiquid stock at the time and price they would like. The good news is that spreads which were very wide one day can be significantly closer another day as market conditions change.