But unless you’re starting with a large amount of start-up capital, the transaction costs of investing in a large diversified portfolio can be expensive. Instead, it may be better to use investment trusts to get exposure to the market.

These can be a great way for investors to buy and hold over the long term. They enable people to pool their money together to get exposure to many different companies via a single investment vehicle.

Income and growth

With this in mind, the Temple Bar Investment Trust (LSE: TMPL) is one fund to consider for anyone seeking both income and growth. The trust invests primarily in UK equities, across different sectors, seeking undervalued stocks.

The fund managers use a contrarian approach in seeking “unloved, misunderstood or forgotten stocks”. It intends to hold stocks for long periods, typically around four or five years, and aims to have a slow-but-steady turnover of its portfolio holdings.

Its top five holdings are well-recognised large-cap names, including Shell (6.3%), HSBC (6.2%), GlaxoSmithKline (5.9%), BP (5.3%) and Barclays (4.6%).

Dividend increases

The business is particularly suited to its investment trust structure as it enables the fund keep some of its dividend income in reserve, allowing it to top up income in lean years and smooth out dividend payments across the cycle. This, combined with the conservative management of its portfolio, has enabled the fund to raise annual dividends for 34 consecutive years.

This is an impressive feat, especially given that it is one of the higher yielding investment trusts on the market. With shares in the Temple Bar Investment Trust currently trading at a 5% discount to its net asset value (NAV), the fund currently offers a dividend yield of 3.2%.

It has low costs, with an ongoing charge of 0.49%, which includes a management fee of 0.35%.

Low cost

The Independent Investment Trust (LSE: IIT) is another low-cost option to consider. With ongoing charges of just 0.25% last year, the fund is one of the cheapest on the market.

The Independent Investment Trust seeks to provide good absolute returns over long periods by investing in UK and international equities. Its portfolio consists predominantly of UK companies, but there is a broad spread across large-cap, mid-cap and small-cap names.

The fund consistently keeps portfolio turnover very low, which reduces transaction costs, and is known to hold many of its investments for long periods. Its long-standing position in premium mixer drinks company Fevertree Drinks, which is currently its top position, has been a significant contributor to its recent outperformance. Elsewhere, it is overweight in the retail sector, following recent new purchases in Footasylum and Quiz.

On the downside, shares in the investment trust are expensive. They trade at a 14% premium to its NAV, as the fund is in high demand following strong recent gains. Over the past five years, it has delivered a total return of 157%, against the FTSE All-Share gain of 46%.

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If you’re new to the world of investment trusts, then you might want to start out by taking a look at these low cost funds.

Global diversification

If I were going to pick just one fund to invest in, I would probably go with the Scottish Mortgage Investment Trust (LSE: SMT).

Launched in 1909, Scottish Mortgage is considered to be Baillie Gifford’s flagship investment trust. The fund invests in both developed and emerging economies, giving investors global diversification and the chance to participate in faster-growing markets.

Although investing in foreign stocks provides the possibility of greater long-term returns, it also carries exchange rate risks. As the pound strengthens or weakens against other currencies, your returns may fall or rise. The biggest exposure is to the dollar as the US is the top country exposure in the portfolio, with 47% of its total assets. Other sizeable exposure is to China with 19%, followed by Germany, Spain and Sweden. The UK currently represents less than 4% of its assets.

The managers of the trust aim to achieve a greater return than the FTSE AllWorld Index in sterling terms over a five-year rolling period. It has, so far, done an excellent job, having delivered total returns of 227% over the past five years, against the index’s comparable performance of 104%. Moreover, fees are low with an AIC annual ongoing charges ratio of 0.44%.

UK focus

The Independent Investment Trust (LSE: IIT) is an alternative pick for investors looking for more UK exposure. It benefits from very low costs, with an AIC annual ongoing charges ratio of just 0.34%.

Over the five years, the trust has delivered NAV total returns of 163%, which compares favourably to its fund peer group’s average return of 112%. The surge in shares of premium mixer drinks company Fevertree Drinks has no doubt played a big role in the fund’s performance, as the stock is its single biggest position, representing 12.5% of total assets.

Independent Investment Trust also has a great deal of exposure to the housebuilding sector, with big positions in Redrow (7.5%) and Crest Nicholson (6.4%). Along with smaller positions in Berkeley Group, McCarthy and Stone and Persimmon, its total exposure to the housebuilding stocks added up to 22.8% as of 31 May.

Smaller companies

For investors looking to gain exposure to smaller companies, an investment trust such as Henderson Smaller Companies (LSE: HSL) may offer an easier way in for those who might not have the time or experience to research small-cap stocks.

Henderson Smaller Companies is one of the top-performing UK small-cap funds. It has outperformed the Morningstar Investment Trusts UK Smaller Companies benchmark over the past five years, with an NAV total return of 63.6%, against the benchmark performance of 52.3%. What’s more, with shares in the trust trading at a substantial discount to its NAV of 15.5%, investors can effectively purchase its assets for less than the sum of its parts.

Last year, the fund had an AIC annual ongoing charges ratio of 0.44%.

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