Trusts often provide wide diversfication, which gives some protection from localised issues that can destroy investor profits. Some of these financial vehicles also provide targeted exposure to hot themes (like artificial intelligence, or AI), regions (think emerging regions) and industries (such as renewable energy).

Allianz Technology Trust (LSE:ATT), JPMorgan European Discovery Trust (LSE:JEDT), and Fidelity Special Values (LSE:FSV) are all great examples of high-performing investment trusts. Over the last half a decade, they’ve delivered an average annual return of 16.3%.

Can they keep producing the goods?

Riding the tech boom

Every aspect of our lives is becoming more digitalised. Allianz Technology Trust provides a clear pathway for investors to capitalise on this. And it’s done so with roaring success, providing an average annual return of 16.4% over five years.

Competition is significant across the technology sector. What’s more, the pace of development means today’s tech darling can be scrap metal after a few years (think Blackberry and MySpace).

Trusts like this Allianz can significantly reduce this threat. This one owns shares in 50 different companies, and what’s more, its portfolio is dominated by stocks with long records of innovation and very deep pockets.

Major holdings include market leaders Nvidia, Microsoft, Alphabet, and Apple. I think these US shares can continue dominating the tech scene over the next decade at least.

Euro star

The JPMorgan European Discovery Trust’s mission is “to provide capital growth from a diversified portfolio of high–quality smaller companies in Continental Europe“.

Investing in smaller companies can be riskier, and especially so during times of economic uncertainty. But the excellent long-term returns of this trust helps soothe any fears I have.

Over five years, it’s delivered an average annual return of 11.3%.

I especially like how highly diversified this trust is, which helps mitigate its focus on smaller businesses. Major European economies including Germany, France, and Italy are all well represented. And sectors range from consumer goods and energy to banks and information technology.

Can it continue to outperform? I think it can, helped by a steady rotation from expensive US shares into cheaper European ones. This trust holds 86 in total.

Biggest returns

Fidelity Special Values is geared towards companies it feels are unduly cheap, and whose potential the stock market is yet to recognise.

It’s done so with considerable success. Since November 2020, it’s delivered an average yearly return of 21.2%.

This Fidelity trust comes with a distinct UK flavour, which creates greater geographic risk. However, this strategy makes sense given the cheapness of London-listed companies versus those on overseas exchanges. More than 80% of its holdings are UK shares like Aviva, Lloyds, and British American Tobacco.

With 152 different equity holdings, this investment trust provides excellent diversification by industry. This is helped by its large contingent of global companies.

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This is perhaps no surprise given the uncertain macroeconomic and geopolitical landscape. By buying shares, investment trusts and exchange-traded funds (ETFs) that offer (or are focused on) value, investors enjoy a cushion that can help protect them from share price volatility.

The following UK stocks and funds have rocketed in value so far this year. And I think they can continue, making them top picks to consider.

Great fund

As its name implies, the iShares Edge MSCI World Value Factor UCITS ETF (LSE:IWVL) is designed with value in mind. And it’s risen 11.2% in 2025.

The fund holds 398 global shares in total, and searches for cheap shares based on three key metrics: the price-to-book (P/B) ratio, forward price-to-earnings (P/E) earnings, and enterprise value-to-cash flow from operations (EV/CFO).

What I especially like is its wide diversification across geographies, shielding investors from regional issues that could hamper performance. Of the 23 developed markets it covers, the US is its single largest, representing 37.1% of the fund.

The fund’s also well spread across a variety of sectors to reduce risk and provide a multitude of investment opportunities. Be aware though that information technology’s its biggest sector, which could impact performance during economic downturns.

Top trust

The Fidelity Special Values (LSE:FSV) targets “unloved companies that are entering a period of positive change that the market has not yet recognised“. It’s a strategy that’s paid off spectactularly in 2025 — this investment trust’s risen 21.1% in value in the year to date.

This could be down to its focus on UK shares, a region which has been overlooked for years due to political turbulence and weak growth. Cheap FTSE 100 stocks it owns include BAE Systems, Standard Chartered and GSK.

Veteran fund manager Alex Wright has seen the trust more than tripled in value since he took the helm in 2012. I think it can continue impressing, despite the higher regional risk it carries compared with global trusts.

Today, Fidelity trades at an 3.9% discount to its net asset value (NAV) per share, providing something extra for fans of cheap stocks.

FTSE 100 bargain

In my opinion, HSBC‘s (LSE:HSBA) one of the best FTSE 100 bargain shares available to investors today. The company trades on a forward P/E ratio of 9.1 times, and carries a 5.4% corresponding dividend yield. This solid all-round value comes despite HSBC’s incredible 19.2% share price rise in 2025.

Investing in Asian banks offers higher-than-usual risks than normal. China’s economy’s picking up speed following underperformance in recent years. But there’s a chance US-led trade tariffs could choke off its recent strong momentum.

That said, I still believe the potential benefits of owning HSBC shares outweighs the risks. Personal wealth levels and population sizes are soaring across its emerging markets, driving revenues skywards. And the bank’s expanding rapidly to capitalise on this enormous long-term opportunity.

The post These dirt cheap stocks, investment trusts and ETFs have surged in 2025! Time to buy? appeared first on The Motley Fool UK.

Growth

Thematic trusts with a tech flavour have considerable growth potential as the digital revolution rolls on. The Allianz Technology Trust (LSE:ATT) is one that’s already proved its mettle — the average annual return over the past five years is 14.9%.

This financial vehicle holds 46 companies, ranging from semiconductor and smartphone manufacturers to social media operators and software developers. This provides exposure to multiple megatrends for the next decade and beyond, from the artificial intelligence (AI) and cloud computing booms to increasing consumer electronics demand.

As we spend more time online and automation spreads, I think the trust could grow rapidly in size. Remember, though, that its holdings are highly sensitive to economic conditions. This means returns could disappoint during economic downturns.

Dividends

There’s much more to successful passive income investing than just choosing shares with the largest yields. With Schroder Income Growth Fund (LSE:SCF), investors have enjoyed consistent dividend growth AND yields that top the market average.

Since it was created back in the mid-1990s, dividends here have grown every year. And according to the Association of Investment Companies (AIC), dividend growth has averaged 2.8% during the last five years.

Today, its forward dividend yield is 5.3%, far above the FTSE 100‘s 3.5% average.

As the graphic shows, this trust has significant exposure to UK blue-chip shares across multiple sectors. This provides good diversification to reduce risk, and helps provide a smooth return across the economic cycle.

As a UK investment trust focused on domestic equities, it carries greater regional risk than more global trusts. However, this hasn’t prevented it delivering strong returns more recently (its annual average return since mid-2020 is a healthy 10%).

Value

The Fidelity Special Values (LSE:FSV) trust is designed to achieve capital growth “primarily through investment in equities (and their related securities) of UK companies which the investment manager believes to be undervalued or where the potential has not been recognised by the market“.

The results have been spectacular. During the last five years, it’s delivered an average annual return of 18.4%. That’s despite, as with the Schroder dividend trust I’ve described, its narrow geographical makeup bringing higher risk.

While this remains an ongoing danger, I think this focus on UK shares could also continue working in its favour, though. Recent demand for British shares has jumped due to their cheapness, and especially compared with US shares. Yet, many quality London-listed companies still look undervalued, providing scope for further gains.

Take Standard Chartered, this Fidelity trust’s single largest holding. Price-to-earnings-to-growth (PEG) and price-to-book (P/B) ratios of below one suggest the FTSE 100 bank still offers tremendous value.

The trust’s high weighting of cyclical shares (like financials, industrials, and discretionary consumer goods businesses) may leave it vulnerable during economic downturns. But on a long-term basis, I’m confident it can deliver outstanding shareholder returns.

The post Looking for growth, dividends, or value? These 3 investment trusts could be strong options to consider appeared first on The Motley Fool UK.

Both make the Association of Investment Companies’ list of Dividend Heroes. They’ve raised their dividends for 55 and 54 years in a row, recently yielding around 5% and 4%, respectively. Here are three more I’m considering.

Contrarian investment trust

I quite like the look of Fidelity Special Values (LSE: FSV) at the moment, with a 3.2% dividend in 2020. That’s not one of the biggest yields around. But it is nicely progressive, having grown by around 25% over the past three years. And with a long-term outlook, I see better value in a relatively modest dividend with a progressive future then I do in a higher yield but with less convincing prospects.

About three-quarters of the trust’s assets are in the UK. The current biggest holding is Legal & General, with Aviva taking the third spot. Royal Dutch Shell is sandwiched in between. The trust is managed with a contrarian approach, and that shows from its big investments in these two depressed sectors – sectors I definitely consider risky now.

Still, a contrarian outlook fits in with my risk profile, and there’s reasonable diversification in the trust’s assets. I’m putting Fidelity Special Values on my list of buy candidates.

Big yield

I can’t overlook Merchants Trust (LSE: MRCH), which produced a dividend yield of 6.2% in 2020. That was a year when earnings were hit by Covid-19 too. And it shows the benefit of investment trusts being able to hold back some cash in better years to keep the dividends going during leaner times.

This trust has lifted its dividend for 39 straight years, so there should be plenty of motivation to keep it going. Merchants has GlaxoSmithKline as its top holding, and I’m upbeat about that. British American Tobacco and Imperial Brands are in the portfolio too. And while they both offer high dividend yields, that might introduce an ethical barrier for some investors.

What’s the downside? Well, we really need to see earnings growth getting back on track. If it doesn’t, and dividend progress falters, we might see investors heading for the door. I think that risk is minimal, though. And I’m bullish.

Global income

I’ll head away from UK-focused trusts now and go for Murray International Trust (LSE: MYI). This one still has around 10% of its cash invested in the UK, but the rest is spread quite widely around the globe. It aims to achieve better than average dividend yields, and to maintain progressive rises ahead of inflation. The trust has been achieving that, providing a yield of 4.8% in 2020.

The international diversification is intriguing. Murray International has Taiwan Semiconductor Manufacturing, which has a NASDAQ listing, as its biggest holding. Unilever is its biggest UK-based holding, and that’s a company I’ve liked for many years (but have never invested in directly).

The risk for me here is international uncertainty. By that I don’t mean just risky economies and volatile exchange rates. I also mean my own lack of understanding of a lot of the companies involved. But I can’t help feeling it might complement my UK-focused investment trust holdings.

The post Some of the best UK investment trusts to buy for income appeared first on The Motley Fool UK.

Freetrade has identified three that seek out undervalued companies across the indexes, and I’m taking a look.

A contrarian investment trust

Fidelity Special Values (LSE: FSV) suffered a painful share price crunch in the first weeks of the pandemic. It quickly lost more than 50% of its start-of-year value, way worse than the FTSE indexes. It’s been muddling along since then, until the November spike came along. So far in the month, the price has soared 36%. But it is still down 15% year-to-date.

Net asset value per share (NAV) is estimated at 229p. So with the shares currently at 236p, we’re looking at a premium of 3%. It does look like the super-cheap opportunity has gone, but I’m still tempted to buy.

Fidelity describes itself as a “contrarian investment trust that thrives on volatility and uncertainty.” Sounds perfect for 2020. But what shares does it hold? Insurer Aviva is among FSV’s top stocks, and I rate that a top contrarian pick right now. Halfords is there too, another I see as undervalued.

Smaller companies

Freetrade’s next pick is Aberforth Smaller Companies (LSE: ASL). Small companies can be easily overlooked when investors are seeking the relative safety of blue-chip stocks. And those are what Aberforth looks for here.

Again, we see a November uptick, with the investment trust up 38%. The share price is down 22% so far in 2020, so maybe there’s more gain to come?

NAV stands at an estimated 1,229p, with the shares at 1,194p, at the time of writing. So we could pick up Aberforth Smaller Companies at a discount of 2.8%. Smaller stocks are likely to be more volatile though (but we’re talking 2020 here, so I guess anything goes).

I invested a lot in small-cap stocks in my earlier years, seeking growth rather than income. I see many as overlooked and undervalued now, and I think they’re likely to continue their recovery. Perhaps with some more ups and downs on the way.

Wide index spread

The last of the three is Lowland Investment Company (LSE: LWI), which has an interesting approach to sectors. This investment trust puts around half its cash into FTSE 100 companies. The rest goes into companies its managers think are undervalued, picked from across the smaller indexes.

I like the idea of mixing blue-chip stability with a bit of smaller-cap potential. So this one definitely appeals to me. And looking at top index holdings, I see Tesco and GlaxoSmithKline there. Those are both companies I’m bullish about for the long term.

The November spike struck here too. The Lowland share price has climbed 32% in November. But even so, the shares are still down 18% year-to-date. The current estimated NAV stands at 1,180p, with the shares on exactly the same price, as I write. So, in this case, there’s no discount or premium. But either way, I’m putting Lowland Investment on my list of investment trusts to examine more closely.

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Top performer

The Finsbury Growth & Income Trust (LSE: FGT) is one of the best performing funds in the UK equity space, having delivered total net asset value (NAV) returns of 81% over the past five years. This compares favourably to the FTSE 100’s total return of just 36% in the same period.

Nick Train, who has been managing the fund since 2000, has achieved this success by investing in a concentrated portfolio of durable, cash generative businesses that are under-priced on its valuation analysis. With just 26 holdings altogether, he is able to keep portfolio turnover as low as possible, while keeping most of his exposure to his highest-conviction picks.

The fund’s five biggest positions are Diageo (9.5%), Unilever (8.9%), RELX (8.7%), London Stock Exchange (8.6%) and Hargreaves Lansdown (8%).

Concentration risk

A concentrated portfolio can be a double-edged sword though, as it can increase your exposure to a small number of winners but does this by reducing diversification, which can increase the overall risk level of the portfolio. It’s all fine when your best investments are doing well, but when things turn sour, you could suffer major losses even if just a few of your top positions implode.

There are countless examples of companies that have ended up in serious trouble, and even the best stocks can suffer huge losses, sometimes abruptly, taking overly concentrated investors down with them.

Contrarian investing

Fidelity Special Values (LSE: FSV) is another fund that has massively outperformed the FTSE 100. It’s an actively managed investment trust that aims to deliver attractive long term capital growth for investors by investing in unloved companies in sectors that are out of favour.

Over the past five years, the trust has beaten the FTSE 100 by a whopping 68 percentage points, after having achieved a cumulative performance of 104% — almost three times the Footsie’s return over the same period.

Long-term view

Alex Wright, who has been managing the fund’s portfolio since 2012, has demonstrated considerable skill in picking under-valued stocks. He’s a value contrarian investor who looks for companies which have potential for share price growth that has been overlooked by the market. Alex has a long-term investment view and only seeks to invest in companies where he understands the potential downside risk to limit the possibility of losses.

Alex’s portfolio typically has a heavy bias towards medium-sized and smaller companies, which is a major factor in the fund’s outperformance against the Footsie. In contrast, however, it is more diversified, with typically between 80-120 stocks held in the portfolio. It also has greater geographical diversification, with up to 20% invested in overseas stock markets.

The post These investment trusts have been crushing the FTSE 100 appeared first on The Motley Fool UK.

Fidelity Special Values (LSE: FSV) is one such example. This trust is one of the market’s best performers. Since the beginning of the year, the shares have returned 24% excluding dividends. And even after this performance, Fidelity continues to trade at a discount to net asset value, which is around 261p (according to the most recently published net asset value report). 

A focus on value 

Fidelity is focused on value and the firm’s substantial weighting towards financial services businesses has helped it beat the market this year. The fund is not limited by nationality and has benefitted from the rally in US financial stocks during the past 12 months. Its current largest position is Citigroup at 5.7% of the portfolio, followed by UK dividend champion Royal Dutch Shell at 5.2%. 

As well as the trust’s outperformance, the other attractive quality is its relatively low cost. With an annual management fee of 1.1%, the fund is at the top end of what I would call “appropriately priced,” but the returns achieved over the past five years more than justify the higher fee. 

Since the end of 2014, Fidelity has delivered a total return for investors of 144%, outperforming its benchmark, the UK All Companies Index by nearly 100%. The index has returned 75% over the same period. 

With a dividend yield of 1.8% as well, significantly more than the average rate on offer at high street bank savings accounts, Fidelity looks to me to be a great addition to my retirement portfolio. 

International value 

The British Empire Trust (LSE: BTEM) has a much broader mandate than Fidelity, and this is one of the reasons why the fund looks attractive to me. 

British Empire is a global investor, looking for undervalued companies all over the world. Only 1% of its portfolio is allocated to UK equities. Some 32% is allocated to European stocks, 20% is allocated to North American equities, and the remainder to Asian and other international stocks. Over the past five years, the fund has produced a return of 79% for investors, outperforming the FTSE 100 by 38% over the period excluding dividends. 

Despite these gains, the shares trade nearly 11% below British Empire’s net asset value of 805p. 

Another positive about the trust is its low management fee. The fee is 0.9% per year, 0.2% below that of Fidelity, although the performance gap explains the difference (British Empire’s dividend yield is also lower at 1.6%). Still, for exposure to international markets, with a proven management team, it seems that you can’t go wrong with the Empire trust. 

As a way to benefit from global growth and protect my portfolio from Brexit, this trust seems to me to be worthy of further investigation. 

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