Investment trusts offer diversification and the chance to earn very decent returns. Here’s three of my favourite trusts I’d buy today if I were starting a new £20,000 Stocks and Shares ISA.
High-quality UK stocks
I think Finsbury Growth and Income Trust (LSE: FGT) is a great way to capture the growth of some exceptional UK-listed firms.
The trust is managed by Nick Train, who uses a bottom-up stock picking approach to assess the fundamentals of an individual business.
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Five Largest Holdings (to 31 March)
| Weighting | |
| RELX | 12.4% |
| Diageo | 11.0% |
| London Stock Exchange | 10.3% |
| Burberry Group | 10.2% |
| Unilever | 8.8% |
The portfolio is extremely concentrated, with 83.5% of assets in just 10 stocks. So there’s a risk this high-conviction investing style produces periods of underperformance if certain big holdings struggle.
However, the trust’s long-term performance has been exceptional, more than doubling the 10-year return of its FTSE All-Share Index benchmark.
I expect Diageo, RELX, and Burberry all to do very well over the next decade. Each is truly global, with substantial growth opportunities.
The manager has a multi-decade investing horizon, which matches my own. If I didn’t already own many of the holdings in my own portfolio, I’d add this trust to my ISA today.
The ongoing charge is 0.60%.
Global mining
My second pick is BlackRock World Mining Trust (LSE: BRWM). As the name suggests, the trust runs a diversified portfolio of global mining stocks.
My investing thesis here is that the decarbonisation of the global economy will take many decades and need a massive amount of raw materials. That includes iron ore for wind turbines, lithium for electric vehicle batteries, and copper for electrical wiring.
All of this is covered by the mining companies held in the portfolio. Top holdings include copper giants BHP Group and Rio Tinto.
Global mining has been beset by underinvestment for a long time. That means there will likely be global shortages of metals (particularly copper), which should translate into higher prices and earnings.
As well as the potential for major growth, there’s also a juicy 5.9% dividend. Growth and income is the sweet spot for me, and I reckon this trust offers both in spades. It’s why I own it.
One thing worth considering is that the mining sector can be very volatile, causing large swings in the trust’s share price.
The ongoing charge is 1.06%.
Rapid Growth
Pacific Horizon Investment Trust (LSE: PHI) invests in the Indo-Pacific region (excluding Japan). Top holdings include Samsung and Ping An Insurance.
Asia is the fastest growing region in the world. Indeed, it’s expected to contribute more than half of global growth in the next few decades.
This investment is an ideal vehicle for me to get exposure to this rapid growth. That said, around a third of assets are invested in China, which creates risk if its relations with the US worsen.
One thing I like about the trust is that it invests wherever it sees opportunities. It’s not just the tech sector. Therefore mining and energy stocks are well represented in the portfolio. This provides welcome balance and I like the low-cost 0.74% fee.
Finally, the shares are trading at a 9.8% discount to the net asset value (NAV) of the trust. I’ve been buying recently.
