There are hundreds of investment trusts in the UK today, giving investors plenty to choose from. However, that is also somewhat daunting, as it would likely take months to sift through them all. Here then, I’m going to outline two quality trusts listed on the FTSE 250 that I’d start off with in a new Stocks & Shares ISA.
The energy transition
The first one I would go for is BlackRock World Mining Trust (LSE: BRWM). As the name indicates, this trust holds stocks in the global mining sector (66, to be precise). It invests in diversified miners such as Vale, BHP, and Glencore.
Now, this area of the stock market displays above-average volatility when the global economic outlook softens, as it has recently. In particular, the Chinese economy, which consumes vast quantities of raw materials, has been showing signs of weakness.
The prices of copper and steel, two key commodities in the portfolio, have consequently struggled in 2023. And this has filtered through to the trust’s share price, which has dropped 15%, to 584p this year.
However, I think this dip could provide an excellent entry point and I’m considering topping up my own holding. That’s because certain metals are going to be key to a low-carbon future. That fact hasn’t changed since last year.
For example, a typical electric vehicle (EV) battery pack needs around 8 kg of lithium, 35 kg of nickel, 20 kg of manganese and 14 kg of cobalt. Meanwhile, charging stations and solar panels require lots of copper. Wind turbines are built with iron ore, copper, and aluminium. The list goes on.
In fact, according to the International Monetary Fund (IMF), replacing fossil fuels with low-carbon technologies would require an eightfold increase in renewable energy investments. This would unleash an unprecedented demand for metals in the coming decades.
Yet material supplies are forecast to remain constrained, which bodes well for miners’ profits and dividends.
Speaking of payouts, the trust has a tremendous long-term record of increasing dividends. And today, the stock offers a 6.84% dividend yield.
While there could be a dividend reduction looming, I do expect the payout (and share price) to trend higher over time.
Cherry-picking FTSE 100 stocks
When it comes to the FTSE 100, I prefer to hunt with a spear rather than a net. That is, I’m not interested in buying a passive index fund that tracks all 100 Footsie shares. I prefer to cherry-pick what I consider to be the best.
This is also the investing philosophy of Finsbury Growth & Income Trust (LSE: FGT), run by star manager Nick Train. He invests predominantly in UK-listed companies, with his largest five holdings in Footsie stocks (as of July).
| Weighting (%) | |
| RELX | 12.1% |
| London Stock Exchange Group (LSEG) | 11.1% |
| Diageo | 10.4% |
| Burberry Group | 8.8% |
| Unilever | 8.8% |
Now, while the trust has delivered strong long-term returns, it did record a 5.8% fall in its net asset value last year. There’s always a risk that it could underperform again, especially given the concentrated nature of the portfolio (with only 22 stocks).
However, I highly rate RELX and LSEG. Both are extremely profitable and look poised to benefit handsomely from artificial intelligence (AI).
This is why I recently invested in the shares and plan to hold them for the next 10 years.
