How to set up a regular savings plan

David C Stevenson's three-part series on how to set up a long-term regular savings plan using five simple investment trusts.


This week,I want to start a series on regular savings plans for investment trusts. Setting up regular investments in funds is incredibly easy if you're dealing in unit trusts, but as soon as you move into the world of shares, be they exchange-traded funds (ETFs) or investment trusts, it becomes a little trickier. The big platforms do allow you to set up a monthly "trade" order, to invest in a number of shares, ETFs and investment trusts, generally at a fraction of the normal dealing fees. But there is a wonderful lower-cost alternative investment-trust savings plans.

These are usually set up by the investment-trust managers themselves, and administered by the companies that run either the share registrar services, or the regular stockbroking plans. They're usually free, or very low cost. Some of the bigger fund providers, such as Aberdeen, even offer individual savings account (Isa) versions of them too. I think such schemes are a very good idea I've run as many as 15 simultaneously and I think one great long-term strategy is to invest in five bedrock investment trusts, using these regular investment plans.

View the portfolio as your university fees savings fund or even an alternative pensions pot. It shouldn't be complicated put, say, £150 a month into each of the five, if you can afford that. Don't touch it for at least ten years, and just check the regular statements every year to make sure nothing terrible has happened.

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I know that MoneyWeek is already a big fan of investment trusts, and you can access the model investment-trust portfoliohere (which has six holdings and is updated roughly once every six months by Merryn Somerset Webb). If you own those trusts already, you can see my portfolio of five trusts as a companion, or an alternative (and there may be some crossover between them).

For me, the key in picking these trusts is to invest in managers who are committed to the idea of "permanent capital" which uniquely is what investment trusts are built on. The managers and non-executive directors need to understand that you'll still be sending money their way in not five, but ten or even 20 years' time, and take that responsibility seriously. Ideally, I'd like to see a very specific mandate to grow your capital via an explicitly stated investment strategy.

Over the next few articles I plan to list my five candidates. Today I'll kick off with my first idea: TR Property (LSE: TRY). This property specialist has been around in one guise or another since 1905, and is now under the F&C banner. I quite like property shares and real-estate investment trusts (Reits) in particular they're backed by "hard" assets, and have a mandate to grow income and to accumulate capital gains gradually.

Admittedly, I believe we are near the top of the current property cycle, but 2016 might be another decent year particularly as the recent sell-off has pushed some Reit prices sharply lower, offering a long-term buying opportunity. For example, TR Property is currently on an 11% discount to net asset value (NAV), much higher than normal.

TR takes a fund of funds approach. This means the manager does all the legwork of choosing which of the long list of Reits to buy, and also invests directly in the odd shopping centre (the Colonnades complex in Bayswater, for example) or industrial unit. On the downside, funds of funds are normally expensive. TR isn't the cheapest option that title belongs to the growing number of real-estate fund ETF trackers, mostly run by iShares.TR charges 0.76%, plus a performance fee, which pushed total costs last year to a not-insubstantial 1.64%.

That said, it has been well run by its manager, Marcus Phayre-Mudge. Since he took over in April 2011, NAV total returns have been 65%, compared to 40% from the benchmark. The yield is just 3% (compared to a sector average of closer to 4%), but the dividend is well covered and has grown at a compound rate of 9.5% for much of the last decade.

The manager has been making good calls about which bits of the property spectrum to invest in. Just now, roughly 40% of the portfolio is invested in the UK; 21% is in France; 19% in Germany; and 6.6% in Sweden. Sector-wise, the fund's current big play is European shopping centres one of the biggest investments is in huge French shopping-centre group Unibail-Rodamco. Other big bets include German residential funds and London West End offices. These all sound like smart moves to me.

The fund has also taken some rather interesting side bets in the past on more specialist niches, such as UK residential property via Grainger, and UK student housing via specialist Unite Group. There are also thedirect property holdingsI mentioned earlier. In all, it's a solid almost boring long-term permanent capital vehicle, in a good income-generating sector with a long track record. And following the recent blip, now looks a good time to start putting some money to work.

David C. Stevenson

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire.
He writes his own widely read Adventurous Investor SubStack newsletter at

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit as well as in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.