If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has some suggestions.

Is it time to buy? Are we at or near the point of maximum fear in global stockmarkets? It’s impossible to say (although the bottom will seem so obvious in hindsight). And we must never forget that markets are perfectly capable of remaining irrational for much longer than any of us can stay solvent.

What we can say, however, is that right now an awful lot of assets are beginning to look very cheap indeed. You can hear more about this on this week’s podcast (it is here).

But if you are beginning to think about buying it is worth focusing on the investment trust sector for the simple reason that if you buy carefully you aren’t just getting bombed out stocks, you are getting them at a discount to their net asset value too (Max explains this in more detail here for those of you new to the sector).

Most investment companies have fallen along with the wider market (bar a few such as BH Macro which aim to benefit from rises in volatility). The big defensive trusts – which aim to protect your capital – have held up pretty well too. Think Ruffer, Capital Gearing and Personal Assets. (which I hold).

The worst hit were (obviously) anything to do with energy markets and Russia (JPMorgan Russian, which I hold, was down 11.6% yesterday). Smaller company trusts also did pretty badly. So where should you look?

If you think things aren’t as bad as they look and you suspect there was no tech bubble in the US in the first place (we aren’t 100% with you on this one), now is the time to top up holdings in anything long term growth orientated – so pretty much anything run by Baillie Gifford (I sit on the board of of the trusts they are contracted to manage – the Baillie Gifford Shin Nippon).

A lot of Moneyweek readers will be holding Scottish Mortgage in their investment trust portfolios. A few months ago we begged you do rebalance given its massive outperformance so that you were not over exposed to US growth stocks. Fingers crossed you did. If you did not, you might want to use today’s bounce to think about it!

Otherwise the bullish might add some of the smaller-cap trusts to watch lists – we can expect pretty intense government action to support the corporate sector (helicopter money is definitely coming…), so should the likes of say River & Mercantile UK Micro Cap really be down 20% or so this year and trading on a 25% discount to its net asset value?

Finally there are the defensive trusts. Most readers will hold RIT Capital but Numis suggests Capital Gearing and Aberdeen Diversified Income and Growth as good options. They also like Troy Income and Growth for its “defensive tilt,” as do we.

But the key thing right now is to have an eye to valuations. We have been telling you for some time that if you buy, you must buy cheap stocks for the long term. No change there! You can look at the last update to the investment trust portfolio here (we will be updating it in the near future, too).

Recommended

April price hikes - these are the bills going up in April
Personal finance

April price hikes - these are the bills going up in April

Households will be hit with a series of bill increases from April - here’s what they are and how you can save money.
31 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
31 Mar 2023
Investors flock to NS&I savings after SVB scare
Savings

Investors flock to NS&I savings after SVB scare

Investors are increasingly pumping their cash into the safety-net of NS&I - lured by increased rates and the security of a government-backed savings a…
31 Mar 2023
Nationwide: UK house prices decline at the fastest pace since 2009
House prices

Nationwide: UK house prices decline at the fastest pace since 2009

UK house prices fell for the seventh month in a row in March, Nationwide’s house price index showed.
31 Mar 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall to around £2,000, based on average typical use, for the first time since 2022. We have all the details.
31 Mar 2023
Best areas for buy-to-let in the UK
Buy to let

Best areas for buy-to-let in the UK

If you’re thinking of getting a buy-to-let property you’ll want to know the areas in the country with the highest rental yields
29 Mar 2023
The best one-year fixed savings accounts - March 2023
Savings

The best one-year fixed savings accounts - March 2023

Earn over 4% on one-year fixed savings accounts.
30 Mar 2023