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Are investment trusts the best thing? They may be.
Here are five that I think anyone starting a Stocks and Shares ISA in 2025 would do well to consider. I have bought two myself.
My main attraction? An investment trust can provide diversification in just one purchase. And we have many investment strategies to choose from.
Top five trusts
| Stock | Strategy | Price for 5 years change |
Prediction dividend yield |
Profits are rising (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% |
| The bankers Investment Trust |
The whole world | +17% | 2.4% | 57 | -13% |
| Scottish Mortgage Investment Trust (LSE: SMT) |
The whole world | + 68% | 1.8% | 42 | -12% |
| Schroeder Eastern income |
Asia Pacific net worth |
+11% | 4.3% | 18 | -6.5% |
I would challenge anyone to pick five stocks for a new ISA that would match this lot of diversification – in both industry and global coverage.
The first thing I notice is the Premium/discount column. A negative number means that the stock is trading below the net asset value (NAV) of the investments.
To that end, these look cheap. But the discount also reflects the risk perceived by the market in the investment trust.
It’s cheap compared to the risk
See Scottish Mortgage Investment Trust. The risk comes from the stocks in which the shareholders invest their money. We speak loudly Nasdaq shares here – the so-called Magnificent 7 of artificial intelligence (AI), and more.
Scottish Mortgage holds Amazon, Nvidia, Tesla… and several analysts are calling the AI bubble right now.
The Nasdaq even eased slightly after hitting a record high in September. But I think it’s too early to give up on the world’s best technology stock, at least for my investment horizon of at least five years.
With that perspective in mind, I think the 12% discount should make Scottish Mortgage a worthy consideration for those looking for a diversified investment in technology growth.
A better deal
Bankers Investment Trust is at a similar discount, with investments in other similar Nasdaq stocks. But it also holds similar shares Visa again Chevron. Seems like a less risky tech stock to me. And I wonder if it might be a low-value confusion. I need to dig deeper.
I am also surprised by the difference in discounts between City of London and Murray Income Trust. They are very similar in their strategies, assignments, and holdings. Both include Unilever, AstraZenecaagain RELX in the top 10, and more FTSE 100 shares.
I wonder if the fact that Murray Income is owned abrdn maybe you have something to do with it? That company has fallen out of favor with investors, down 20% in the past 12 months. Again, more research is needed.
A good mix
These trusts I have looked at have all increased their annual returns for many years. If either should fluctuate for one year, that is share price risk (in addition to any particular strategy risk).
But given the current discounts, there’s a very good chance I’ll be adding one of these five to my 2025 ISA.
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