For those just starting out in the investment world, investment trusts are an excellent option. These are companies that can be bought and sold through your broker just like regular stocks, yet actually own a whole portfolio of companies themselves. With the purchase of just one security, you can obtain the diversification benefits of owning a portfolio of 100 stocks or more, significantly reducing the risk of your own portfolio.
Today, I’m profiling two investment trusts that could make excellent core holdings for beginner investors.
Bankers Investment Trust
The Bankers Investment Trust (LSE: BNKR) aims to maximise returns for investors by trading in a diversified portfolio of international shares. The portfolio manager has the flexibility to invest in any geographic region and focuses on companies that generate significant cash flow and pay regular dividends. The trust also aims to pay a regular dividend to shareholders that grow at a rate in excess of RPI inflation.
An analysis of the current portfolio reveals that BNKR has the most exposure to US, UK and Japanese equities. The top sector weightings are financials and technology and the top five holdings include BP, Apple, British American Tobacco, American Express and Microsoft. I like the fact that while this trust has exposure to US stocks, it’s not overly exposed to some of the more expensive tech stocks.
The trust’s performance over the last five years to the end of February has been excellent, with the net asset value (NAV) rising a healthy 83%. The current dividend yield on the trust is 2.25%, with dividends paid quarterly. Fees are very reasonable, with the ongoing charge a low 0.44%. So overall, I believe this trust is an excellent choice for beginner investors.
Murray Income Trust
Another excellent choice for those looking to keep things simple is the Murray Income Trust (LSE: MUT). This trust places a strong focus on income/dividends and aims to provide investors with a high and growing income stream, along with some capital growth as well. It invests predominantly in UK equities although it does have the flexibility to invest 20% of its assets in international stocks.
Looking under the bonnet, the trust currently has an 83% weighting to UK stocks, with smaller allocations to counties such as Switzerland, Sweden, Denmark and the US. The largest sector weightings here are financials and consumer defensive with the top five holdings including Unilever, AstraZeneca, British American Tobacco, Prudential and Royal Dutch Shell.
The Murray Income Trust also pays dividends on a quarterly basis and the current yield is a healthy 4.5%. Over the last five years to the end of February, the portfolio’s net asset value (NAV) increased 39%. Ongoing fees are reasonable at 0.72% per annum.
It’s worth noting that this trust currently trades with a discount of 7% to the assets in the portfolio. As a result, I believe now could be an excellent time to add the trust to an ISA.