Looking for ideas on what to put in your Isa this year? MoneyWeek’s model investment trust portfolio might be a good place to start – and for those who are already invested, now might be a good time to rebalance.
At MoneyWeek we have always been huge fans of investment trusts – companies whose business is to invest in other companies or assets. We like the long-term view that having a pool of mostly-permanent capital allows fund managers to take. We like the idea that trusts have boards of directors charged with looking out for the interests of shareholders. We like the drive in the sector to keep costs down. And we like the fact that investment trusts have a solid long-term record of outperforming other types of investment funds.
So just over six years ago we chose six of our favourite trusts to create a simple virtual portfolio readers can follow should they wish to (I do – I own all the trusts in it). The original plan was to aim for high-quality managers with diversified portfolios and low-ish costs; to buy shares in their trusts; and (crucially) to leave the whole thing be with as little review as we could possibly get away with. Why? Partly because we know all the trusts we choose for it are excellent and we trust the managers for the long term. But also because after all these years of managing MoneyWeek, we know a bit about behavioural finance – so we know that the more we look at the portfolio and the more we think about it, the more likely we are to fiddle with it. And we also know that fiddling leads to unnecessary trading and – the greatest returns killer of all – rising costs.
Why rebalancing is important
That said, we do firmly recommend that you rebalance the portfolio occasionally (something I even sometimes remember to do myself). Readers who have held the portfolio since the beginning and who have not as yet rebalanced will now be very, very “overweight” Scottish Mortgage, a fabulous trust that we have had in the portfolio since the very beginning. If it continues to perform amazingly for the next decade, that’s fine (better than fine even!). But if the pendulum swings and super-growth tech stocks (of the sort that Scottish Mortgage holds) take more of a tumble (as we suspect they might), it won’t be.
So how are we doing? Not badly. By the end of last year, the portfolio had returned 116%, compared with a 64.5% return from the FTSE All-Share and 91% from the MSCI World index since launch in the middle of 2012 (the constituents have changed a little, but not by much since then). We last reviewed the the portfolio in December (you can read that review here) and the current constituents are listed in the box below – we will review them again in six months or so, but for now we are happy with them all as candidates for your Isa this year.
Personal Assets is a deeply defensive trust which aims at ensuring capital protection above all else. It neatly balances out the intense growth focus of Scottish Mortgage. The Law Debenture and Temple Bar trusts give us nice exposure to the value-orientated stock-picking strategies we are keen on, while both RIT and Caledonia give us exposure to both listed and interesting unlisted companies.
We can’t be sure that the investment trust portfolio will continue to beat the market in the way that it has since its inception. However it includes trusts that we consider to be well run; it is well diversified; and it is reasonably low cost – all things that, if not guarantees of, are at least prerequisites of good long-term performance. So far, so good.
|Investment trust||Ticker||Date bought||Price||Price at 11/03/19||Change
|Law Debenture Corp||LWDB||18/9/15||503p||582p||15.7|
|Investment trust||Ticker||One-year return||Total return||NAV at 11/03/19||Prem/disc at 10/12/18||Fwd yield|
|Caledonia Investments||CLDN||8.5%||86.1%||3,487 p||-15.7%||2.0%|
|Law Debenture Corp||LWDB||2.1%||26.8%||656p||-10.4%||3.2%|