Are investment trusts the best thing ever? They might be.
Here are five I think anyone starting a Stocks and Shares ISA in 2025 could do well to consider. I already bought two of them myself.
The key attractions for me? An investment trust can provide diversification in just a single purchase. And we have a whole range of investing strategies to choose from.
Five top trusts
| Stock | Strategy | 5-year price change |
Forecast dividend yield |
Dividend rises (years) |
Premium/ discount |
| City of London Investment Trust |
UK equity income | -2.4% | 4.9% | 58 | -1.1% |
| Murray Income Trust |
UK equity income | -9.0% | 4.8% | 51 | -12% |
| Bankers Investment Trust |
Global | +17% | 2.4% | 57 | -13% |
| Scottish Mortgage Investment Trust (LSE: SMT) |
Global | +68% | 1.8% | 42 | -12% |
| Schroder Oriental Income |
Asia Pacific equity income |
+11% | 4.3% | 18 | -6.5% |
I’d challenge anyone to pick five stocks for a new ISA that can equal this lot for diversification — in both industries and global spread.
The first thing I note is that Premium/discount column. A negative number means a stock is selling for less than the net asset value (NAV) of the things it invests in.
On that score, these look cheap. But a discount also reflects the risk that the market sees in an investment trust.
Cheap vs risky
Look at Scottish Mortgage Investment Trust. The risk comes from the stocks it puts its shareholders’ money in. We’re talking high-flying Nasdaq stocks here — the so-called Magnificent 7 of artificial intelligence (AI), and the rest.
Scottish Mortgage holds Amazon, Nvidia, Tesla… and a few analysts are calling an AI bubble right now.
The Nasdaq has even been easing a bit after hitting an all-time high in September. But I think it’s way too early to give up on world-leading tech stocks, at least with my investing horizon of at least five years.
With that outlook in mind, I think the 12% discount has to make Scottish Mortgage a worthwhile consideration for those who want a more diversified tech growth investment.
Better bargain
Bankers Investment Trust is on a similar discount, with investments in some of the same Nasdaq stocks. But its also holds stocks like Visa and Chevron. It looks less exposed to tech stock risk to me. And I wonder if it might be an underpriced anomaly. I need to dig deeper.
I’m also surprised by the difference in discounts between City of London and Murray Income Trust. They’re very similar in their strategies, dividends, and holdings. Both include Unilever, AstraZeneca, and RELX in their top 10, plus other top FTSE 100 shares.
I wonder if the fact that Murray Income is managed by abrdn might have anything to do with it? That company is out of favour with investors, down 20% in the past 12 months. Again, more research needed.
Good mix
These trusts I’ve looked at have all raised their annual dividends for many years. If any should falter one year, that’s a share price risk (on top of any specific strategy risk).
But looking at the current discounts, there’s a very good chance I’ll add another of these five to my 2025 ISA.
This post was originally published on Motley Fool
