UK Investment Trusts: Best Investment Trusts 2020

Looking to invest in investment trusts? We've reviewed the best UK investment trusts for 2020 to help you get started.
Kane Pepi
Author: Kane Pepi
Last Updated: 17 June 2020

UK investment trusts are can be an excellent type of investment, especially if you’re looking to invest in the broader markets with a small amount. They are also a great way to obtain broad diversification at a lower cost than if you were buying the underlying assets yourself. However, with many different investment trusts to choose from, you may need a hand deciding which is best for you.

This guide covers all you need to know about the best UK investment trusts, including the top online investment platforms and a step-by-step guide on how you can get started.

What are Investment Trusts?

An investment trust is a closed-end fund which operates as a publicly listed company. Shares of these companies are traded on exchanges like the London Stock Exchange.

Beginner investors and those who don’t have time to carry out research can buy the shares of an investment trust and get exposure to the financial markets while allowing the fund to be managed by a professional fund manager.

Investment funds are a type of pooled investments whereby the investors’ money is put together to form a large amount and invested into assets which are normally out of the reach of a small individual investor. This might be due to the minimum size of investment required for certain asset classes, for example.

Unlike mutual funds, the price of the share of an investment trust may not necessarily reflect the value of the portfolio that the trust holds. The return to an investor is realized if there is an appreciation in the share price of an investment trust, meaning its value goes up, or in the form of dividends.

There are several different types of investment trusts. Trusts can be classified by the assets they hold, like global, private equity and real estate investment trusts.

Should I Invest in UK Investment Trusts? Points to Consider

There are many reasons as to why investing in a UK investment trust could potentially beneficial. Let’s take a look at some of the advantages that make investment trusts some of the best UK investments.

  • Invest passively: Investment trusts can be a good choice if you’re a beginner with little experience or if you simply don’t have the time required to devote to tracking the financial markets. By investing in an investment trust, you can ensure that your money is managed by an expert. This means you can invest passively without doing any of the work.
  • Diversification: By investing a small amount of money, a UK investment trust can provide you with access to varied products across different asset classes and markets. This means that you’re portfolios are more balanced and not entirely vulnerable to a single risk.
  • Cost-effectiveness: There are charges levied while buying or selling investment trust shares. However, the fees can cheaper than those associated with other financial asset classes, particularly if you choose a trading platform like eToro that has low charges.

While there are several potential benefits of investing in the UK’s best performing investment trusts, you should be mindful that there are always risks. Some fund managers use leverage to boost the returns which can be a risky strategy, so try to avoid those strategies if your risk tolerance is not high.

It is also not possible to assess the risk of every individual company while implementing an investment strategy. For example, an investment in illiquid instruments may not be appropriate for an elderly investor who is looking for a less risky instrument. Many of the trusts also rely on derivatives trading to generate speculative returns, which may be outside of the risk tolerance of some investors.

How to Invest in UK Investment Trusts

Investing in an investment trust is as simple as buying the shares of a publicly listed company. You simply need to find a stockbroker that offers you chosen investment trust, and then you can buy shares as you would a regular company.

Trading contracts for difference (CFD) investment is another way you can get exposure to an underlying investment without actually owning it. Trading investment trust CFDs also allows you to go short meaning you speculate on the price going down, and trade with leverage, meaning you can borrow capital from brokers to make larger traders.

Most popular investment trusts

  • Scottish Mortgage: Listed in FTSE 100, Scottish Mortgage is the largest investment trust with Assets under management of £8.3 billion. While the trust is classified as Global, it is more inclined towards stocks like Tesla, Amazon and Alibaba Group.

 

 

  • City of London: This fund focuses on safe bets with a high dividend yield, currently sitting at 4.3% yield. It is a more diversified fund with no holding exceeding 4%. The holdings are mature companies with relatively stable cash flows. The recent market movements have significantly impacted the returns, but given its history of steady performance, it’s expected to see higher returns once momentum is regained.

 

  • Smithson: This trust was launched in October 2018 and has delivered returns significantly higher than the Global Smaller Companies benchmark. It investments in listed mid-sized or small-sized companies globally. Like the City of London, it is a highly diversified trust.

 

  • JLEN Environmental Assets Group Limited: This UK investment trust invests in the environmental infrastructure companies, something that will likely be in demand in the future.

 

  • International Public Partnerships Limited: International Public Partnerships Limited invests in not only equities, but mezzanine and subordinated debt of companies, along with senior debt made to companies owning or operating in the industry of infrastructure concessions, assets, or related businesses.

 

 

  • Alliance Trust: This trust relies on global equities with a highly diversified portfolio with respect to stock selection and sector breakdown. The fund also focuses on dividend yield along with capital appreciation to provide real returns to its investors.

 

  • Allianz Technology Trust: With approximately 75% of its portfolio in technology stocks, the trajectory of this trust is similar to Polar Capital Technology Trust. However, it is less heavily concentrated with Amazon being the highest percentage holding at 6%. For investors seeking a high level of diversification in the technology space, this is a good bet in comparison to Polar.

 

  • Murray Income Trust: The Murray Income Trust looks to achieve a high and growing income, combined with some capital growth, through buying primarily UK equities. For an income investor with a bit higher risk, this could potentially be a suitable investment.

 

  • BlackRock Throgmorton Trust: For investors willing to take higher risk, this may be a good option. The trust focuses on small- and mid-caps listed on the LSE. While it has witnessed a sharp fall in 2020, it has still managed to deliver a 5-year return of 85%. It may deliver significant returns once there is a revival in the economy.

 

 

  • Temple Bar Investment Trust PLC: This investment looks for growth in income and capital, aiming to achieve long-term total return greater than the FTSE All-Share index. Temple invests primarily in UK securities, mostly from the FTSE 350 Index.

Where to Invest in Investment Trusts 

We’ve taken you through the best UK investment trusts for 2020, but before you can invest you need to find a suitable online stockbroker. Here are our picks for the UK’s top investment platforms.

1. eToro - Invest in Investment Trusts Commission-Free

eToro is a market-leading social trading platform that is famous for its copy trading tools, which allow you to mimic the portfolios and future trades of top investors at the click of a button.

There are over 800 stocks to trade on the platform, including a number of the UK's best investment trusts. You can choose to either buy the underlying asset or trade investment trusts as CFDs with leverage of up to 1:5.

eToro offers some of the most competitive fees on the market, with no commission or stamp duty on UK stock trading. It also offers tight spreads, though there's a flat $5 withdrawal fee to keep in mind.

Licensed by the UK's FCA, you can invest in confidence with eToro. The minimum deposit is $200, which you can make via bank card, e-wallet or bank transfer. There's also a $100,000 demo account and the eToro app for mobile investing.

Assets: Cryptocurrencies, Stocks, Commodities, Forex, ETFs, Indices

Demo Account: Yes

Educational Material: Great educational material for both beginners and advanced traders

Fees: $5 Withdrawal Fee, $5 Inactivity Fee, No Account Fee, No Deposit Fee

Minimum deposit: $200 (£160)

MT4/MT5: No

Special Features: Copy trading and social trading site

Regulation: FCA, CySEC, ASIC

Payment methods: Credit/debit card, Paypal, Sofort, Rapid transfer, Skrill, Wire transfer, Neteller, WebMoney, UnionPay

Our rating

  • Commission-free REIT trading
  • Buy underlying assets of trade REIT CFDs
  • Social Trading Tools
  • Limited technical analysis tools
  • Not well-suited for the more advanced investor
75% of retail investor accounts lose money when trading CFDs with this provider.

2. Plus500 - Low Cost UK Investment Platform

Plus500 is a UK-based FCA-licensed CFD broker that offers over 2,000 financial instruments, including several of the best UK investment trusts.

One of the best thing about Plus500 is its low fees. There's no commission on stock trading, and it offers very competitive spreads. You can trade shares CFDs with up to 1:5 leverage on this platform, though that goes up to 1:20 if you have a professional trading account.

The simple and intuitive platform means Plus500 is easy to use, and there's 24/7 online support in case you ever need assistance. There's also some helpful informational resources and trading tools, such as the Trader's Guide and economic calendar.

Assets: Cryptocurrencies, Stocks, Commodities, Forex, ETFs, Indices, Options

Demo Account: Yes

Educational Material: Yes

Fees: £10 Inactivity Fee

Minimum deposit: £100

MT4/MT5: No

Special Features: 2,000 trading instruments

Regulation: FCA, CySEC, ASIC

Payment methods: Credit/debit card, Paypal, Bank transfer

our rating

  • Minimum deposit of £100
  • Over 2,000 trading instruments
  • Mobile app available
  • No education material
  • Not suitable for beginners
80.5% of retail investor accounts lose money when trading CFDs with this provider.

3. IG - Trade Over 12,000 Shares

IG is a long-established and respect broker founded all the way back in 1974. With a huge selection of over 12,000 shares, including many of the UK's best investment trusts for 2020, there are plenty of markets to choose from.

This platform offers CFD trading as well as spread betting, the latter being tax-free. CFD trading is done with a commission starting from £3 for UK users, while spread betting fees are calculated via the spread. There's also a 0.5% currency conversion fee to be mindful of.

IG offers loads of advanced trading tools and is compatible with the MetaTrader4 and ProRealTime trading platforms. This means it offers signals and algo trading, among others. There's also plenty of educational resources, including webinars, to help you build up your knowledge.

Assets: CFDs

Demo Account: Yes

Educational Material: Yes

Fees: Commission starting from £3, 0.5% currency conversion fee

Minimum deposit: £250

MT4/MT5: Yes

Special Features: MT4 and ProRealTime

Regulation: FCA, BMA

Payment methods: Credit/debit card, Paypal, Bank transfer

Our rating

  • Over 12,000 shares
  • Spread betting and CFDs
  • Advanced trading tools
  • Share dealing commission for UK users
  • Not suitable for beginners
76% of retail investor accounts lose money when trading CFDs with this provider.

How to Buy Investment Trust Shares in the UK 

It’s quick and easy to invest in the best UK investment trusts with our recommended broker, eToro. Simply follow these steps to get started.

Step 1: Create an account

Click on our ‘Visit eToro’ link to take you straight to the signup page where you can register in just a few minutes.

etoro sign up

You’ll simply need to provide some basic personal details, such as your name, email address and phone number.

Step 2: Verification

As a part of the verification process, eToro requires you to upload a clear copy of your passport or driver’s licence. In most cases your identity will be verified instantly.

etoro verify account

Step 3: Deposit funds

You can fund your account by a range of methods at eToro, including PayPal. Simply select your preferred method, enter the amount you wish to deposit and complete the payment. Remember, the minimum deposit limit is $200.

etoro deposit

Step 4: Choose an investment trust

Simply search for your preferred investment trust in the search bar at the top of the page. Alternatively, click on the trade markets option on the left-hand side, then select stocks to browse the full range of UK investment trusts on offer.

search UK investment trusts etoro

Step 5: Invest

Once you’ve found your chosen investment trust, click ‘trade’. Then choose whether you want to buy the underlying asset or trade a CFD, set the parameters and your chosen investment amount and click ‘Open Trade’ once you’re happy.

Invest in UK investment trusts eToro

 

Conclusion

Investment trusts can be ideal for beginner invests looking for exposure to the financial markets without having to put in hours of research. They also serve as a cost-effective form of passive investment which provides diversification of funds. It has also been observed that the top 10 trusts have managed to consistently beat the benchmark, therefore, making them an attractive option for many investors.

If you want to invest in a UK investment trust today, we recommend signing up with our recommended UK stock brokers, eToro. This FCA-regulated broker allows you to both buy underlying assets and trade CFDs, has super-competitive fees and offers innovative social trading tools, making it ideal for both new and more experienced investors.

eToro: Best UK Stock Broker for 2020

Our rating

  • Choose from over 800 stocks, 0% commission
  • Buy stocks outright or trade stock CFDs
  • FCA, CySEC and ASIC regulated
75% of retail investors lose capital when trading CFDs with this provider.

FAQs

What is an investment trust?

An investment fund is a closed-end fund which is listed as a public listed company. Investors can purchase shares of these companies and the invested amount is managed by a fund manager. Investors can realize their return through capital appreciation or through dividends.

How do investment trusts work?

Investment trusts raise money by selling shares to investors. They then pool that money to invest in a wide range of shares and assets. Professional fund managers are in charge of buying and selling the assets, with the aim of increasing the value of the investment trust.

<>What are the best investment trusts for income?

Generally, these are considered to be the best performing interest trusts with a high dividend yield, such as Scottish Mortage and City of London. However, you should be aware that full investment trusts carry risk, and there's always the chance that you will lose money.

<>What's the difference between investment trusts and funds?

There are several differences between the two. For example, one of the main differences is that investment trusts are closed-ended, meaning they have a fixed pool of capital, whereas funds are open-ended, meaning there's the risk investors could pull out their capital. This means investment trusts are generally regarded as easier to manage and better for long term planning.

<>What types of investment trust are there?

Trusts can be classified based on the type of asset classes they hold like Global, Private Equity, UK Equity Income, Infrastructure and Specialist Debt. Additionally, there may be further classifications within these. For example, there may be trusts concentrated in the technology space within UK Equity Income. It is therefore essential to understand the investment objective of an investment trust before investing in it. A risk-averse investor may not be suitable for a Private Equity investment trust, for example.

Kane Pepi

Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of publications in the online space.

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eToro: Our Recommended UK Investment Platform

eToro: Our Recommended UK Investment Platform

eToro: Our Recommended UK Investment Platform

Visit eToro

75% of retail investors lose money when trading CFDs with eToro.

eToro: Our Recommended UK Investment Platform
Visit eToro

75% of retail investors lose money when trading CFDs with eToro.

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