Some of the best UK investment trusts to buy right now

Investment trusts offer a way to achieve diversification without buying lots of individual stocks. Here are five I’m looking at today.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The stock market offers a bewildering array of buying options, with their many and varied risks.

One way to achieve some safety through diversification is to go for investment trusts, which spreads shareholders’ cash across a range of underlying investments. It’s a strategy I like. And I have the following on my watch list.

The City of London Investment Trust pays dividends of around 5% per year. I value long-term progressive consistency over a one-off high dividend today, and this one has raised its dividends for 55 years in a row now.

The bulk of the trust’s investments are in a varied selection of top FTSE 100 stocks. The top three, currently, are British American Tobacco, Diageo and RELX. BAE Systems and GlaxoSmithkline are also in the top 10.

Murray Income Trust has a similar approach, with AstraZeneca its biggest holding. That, and Diageo, each account for at least 5% of the total invested cash. We’re looking at slightly lower dividend yields here, coming in around 4%. But this is another that makes it onto the Association of Investment Companies’ list of Dividend Heroes, having raised its annual payment for 54 years in a row.

I think these two investment trusts provide attractive selections. They are at risk of any downturns in the FTSE 100 though, offering little diversification beyond that.

Smaller companies

Investing in smaller companies can provide better growth, but with greater risk. The BlackRock Smaller Companies Trust offers that, with a very diverse range of investments. Watches of Switzerland, Oxford Instruments, and Pets At Home are among its top 10 holdings.

Investments are usually a trade-off between growth and income, with the bigger companies typically providing the higher dividends. That’s the case here when going for smaller companies. Dividends are lower, yielding around 2%. But they have increased for 18 straight years.

Global diversification

These trusts all invest mainly in UK stocks, but what about global diversification? For that, I’m looking closely at Bankers Investment Trust. Bankers spreads its investment pretty much evenly around the world, with around a third of the cash in US stocks. Slightly more than that is in the UK and Europe, with the remainder in Asia.

Microsoft is the trust’s biggest holding, with Visa and Home Depot there too. It’s a mix of growth and income opportunities, and it’s another with a great dividend track record. Bankers has lifted its dividend every year for 54 years.

Real estate investment trust

Finally, I think a real estate investment trust (REIT) can provide a great way into the property market, without having to stump up the cash for (and take the risk of) a whole individual property.

I like the look of AEW UK REIT, which invests in UK freehold and leasehold commercial properties. You might think I’m mad considering commercial property right now. And yes, the pandemic has shown the risks involved. But as the UK economy gets back on its feet, I reckon a REIT like this might provide a decent long-term home for some of my investment cash.

Trusts like these expose investors to the risks associated with their individual markets, and often the vagaries of exchange rates. But, on the whole, I’ve liked the way they allow me to effectively invest in far more companies than I could individually.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Alan Oscroft owns shares of City of London Inv Trust. The Motley Fool UK owns shares of and has recommended Home Depot, Microsoft, and Visa. The Motley Fool UK has recommended British American Tobacco, Diageo, GlaxoSmithKline, and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of a woman holding modern polymer ten, twenty and fifty pound notes.
Growth Shares

This FTSE 250 stock has beaten the index by around 10x over the last year

Jon Smith rates a FTSE 250 stock that has smashed the broader index performance and could keep going based on…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

B&M shares are at record lows! Is now the time to consider buying?

The retailer, demoted from the FTSE 100 to the FTSE 250 last year, continues to struggle. But are B&M shares…

Read more »

Investing For Beginners

2 reasons why the stock market could hit 10,000 points by December

Jon Smith explains how the makeup of the UK stock market and the current valuation could support a move towards…

Read more »

Queen Street, one of Cardiff's main shopping streets, busy with Saturday shoppers.
Investing Articles

Why this FTSE 100 rocket is this investment trust’s number 1 holding

A UK investment trust is certainly going against the grain by having this FTSE 100 share as a high-conviction holding…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

These 2 FTSE growth stocks jumped 8% and 4.5% today!

Ben McPoland takes a closer look at a pair of FTSE stocks that are performing really well recently. Why are…

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

This under‑the‑radar FTSE 100 growth stock is also a secret dividend superstar!

Harvey Jones belatedly wakes up to a brilliant FTSE 100 growth stock that has an equally remarkable track record of…

Read more »

Business manager working at a pub doing the accountancy and some paperwork using a laptop computer
Investing Articles

Barratt Redrow share price plunges 9% on profits hit – time to consider buying?

Harvey Jones says FTSE 100 housebuilders continue to suffer with the Barratt Redrow share price slumping on a profit warning.…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Growth Shares

Why the next month could make or break the Lloyds share price

Jon Smith outlines two key events in coming weeks that could influence the Lloyds share price, leading him to make…

Read more »