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Are investment trusts the best there is? They could be.
Here are five that I think anyone starting a stocks and shares ISA in 2025 should consider. I already bought two of them myself.
The key attractions for me? An investment trust can provide diversification in a single purchase. And we have a wide range of investment strategies to choose from.
Five main trusts
| Stock | Strategy | 5 year price change |
Forecast dividend yield |
Dividend increases (years) |
Premium/ discount |
| city of london Investment trust |
UK Stock Income | -2.4% | 4.9% | 58 | -1.1% |
| Murray Income Trust |
UK Stock 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% |
| Schröder Eastern income |
Asia Pacific capital income |
+11% | 4.3% | 18 | -6.5% |
I would challenge anyone to pick five stocks for a new ISA that can match this lot in terms of diversification, both across industries and global distribution.
The first thing I notice is the Premium/discount column. A negative number means that a stock sells for less than the net asset value (NAV) of the things it invests in.
In that sense, these look cheap. But a discount also reflects the risk the market sees in an investment trust.
Cheap versus risky
Look at the Scottish Mortgage Investment Fund. The risk comes from the stocks in which you invest your shareholders' money. We are talking about high flights. Nasdaq actions here: the so-called Magnificent 7 of artificial intelligence (ai), and the rest.
Scottish mortgage retentions amazon, NVIDIA, tesla…and some analysts are talking about an ai bubble right now.
The Nasdaq has even been giving up a bit after hitting an all-time high in September. But I think it's too early to give up on the world's leading tech stocks, at least with my investment horizon of at least five years.
With that perspective in mind, I think the 12% discount should make Scottish Mortgage a valuable consideration for those wanting a more diversified tech growth investment.
Best bargain
Bankers Investment Trust has a similar discount, with investments in some of the same Nasdaq stocks. But it also owns stocks like Visa and Chevron. I find it less exposed to the risk of technology stocks. And I wonder if it might be an underpricing anomaly. I need to go deeper.
I am also surprised by the difference in discounts between the City of London and Murray Income Trust. They are very similar in their strategies, dividends and holdings. Both include Unilever, AstraZenecaand RELAX in his top 10, in addition to other top FTSE 100 actions.
I wonder if the fact that Murray Income is managed by open could it have something to do with that? That company has fallen out of favor with investors, with a 20% drop in the last 12 months. Again, more research is needed.
good mix
All of these trusts I have looked at have increased their annual dividends for many years. If one fails one year, that's a stock price risk (in addition to any specific strategy risk).
But looking at the current discounts, there's a good chance I'll add another one of these five to my 2025 ISA.
