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

How to build a properly diversified investment trust portfolio
Sponsored

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020
Why investment trusts are the best vehicle for your money
Sponsored

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Investment trusts: the Cinderella of investment arrives at the ball
Funds

Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020