IFA’s share their investment trust ISA picks for tax year end


Originally published at: https://whichinvestmenttrust.com/ifas-share-their-investment-trust-isa-picks-for-tax-year-end/

With the end of the tax year fast approaching, a group of Financial Advisers have shared their picks for you, taking account of your age band. Millennials : Suggestions for the younger investor Millennials are those born between roughly 1980 and 2000, and are also sometimes referred to Generation Y. As they range in age…


As one of the referred to first generation of baby-boomers who has been regularly drawing on investment trust dividend income, generated via the medium of a tax-free ISA, for what is now not far short of 15 years I’m here to tell you that it works for me. However, one has got to be prepared to do a bit of homework for it to run smoothly.

For some time now my ISA has contained just 7 x IT holdings, of which 3 I call core holdings and 4 I call non-core. So what do I mean by ‘core holding’?

In terms of my ISA, a core holding for me is an IT that has consistently demonstrated over extended periods of time the ability to increase both income and capital at a rate that is at least in-line, if not greater, than the rate of inflation. Obviously, there will be periods of market uncertainty when an IT will be unable to successfully fulfil such demands made of it. Which is very much why I prefer to measure both income and capital performances of individual holdings over rolling 5-year periods.

Currently the 3 x IT holdings I’ve labelled as my core ISA holdings are City of London (CTY), Murray Income (MUT) and Schroder Income Growth (SCF). Both fund managers of CTY and MUT adopt a large-cap blend of value and growth investment styles while SCF is large-cap value oriented. All 3 ITs can allocate up to a maximum of 20% of portfolio assets in stocks outside of the UK while continuing to maintain their AIC UK equity-income status. Also, these 3 ITs are featured by the AIC has having increased annual dividend pay-outs to shareholders for 20 years and more. Though, I was aware of this fact long before the AIC began bringing it to the attention of investors.

Furthermore, I have a rule that these 3 core IT holdings plus whatever cash is being held will never represent less than 50% of the value of my ISA. I will explain why later.

With that said; what do I mean by a ‘non-core holding’? Simply one that can’t consistently demonstrate over extended periods of time, and to my satisfaction, the attributes assigned to a core holding but nevertheless I consider to be worthy of inclusion.

The 4 x IT holdings I’ve labelled as my non-core ISA holdings are Merchants (MRCH), Securities Trust of Scotland (STS), Murray International (MYI) and F&C Commercial Property Trust (FCPT).
• While the high yielding MRCH can demonstrate overtime that total returns can stay ahead of inflation, in terms of income growth it lags behind inflation. However, Merchants has been able to sustain an enviable 34-year record of never cutting the dividend.
• Likewise, FCPT has been able to steadily maintain a high level of dividend pay-outs to shareholders despite the problems that have beset the UK commercial property sector since the trust came to the market in 2007. And is evidence of the premium quality of the commercial property that the trust owns. Floated at 100p per share 10 years ago, a current share price of 144p is comfortably ahead of a decade of albeit low inflation however, the annual dividend of 6p per share has remained the same throughout the period.
• The inclusion of STS and MYI both provide exposure to global equity income. Though their respective investment approaches are deliberately as chalk & cheese to one another. While STS’s recent capital performance has been impressive due in no small part to overexposure to USA markets, the income performance has been underwhelming. Whereas the opposite has been the case for MYI. A satisfactory growth of dividend income being let down by a couple of years of sketchy capital performance thanks to being exposed to some overseas regions at the wrong time and being made to sit and suffer.

Subject to the rule that my 3 x core IT holdings plus cash account for not less than 50% of the value of my ISA. Then my 4 x non-core IT holdings cannot account for more than 50%. I do this in effort to contain portfolio drift and maintain the balance. Indeed, a month or so ago I made the call to cut back on my holding of STS because it was getting ahead of itself thanks to a rampaging US market. I used the funds to add to Murray Income that had been lagging behind somewhat. As a result of the adjustment I boosted the annual natural income I could draw on by near £300 thanks to MUT being the higher yielder of the two.

When the holdings are combined my ISA is currently yielding a couple of ticks over 4%. There are 3 x ITs comfortably yielding over 4%, 1 x IT yielding exactly 4% and the remaining 3 yielding below 4%.

I’ve discovered with the passing years that I’ve become less and less concerned about what markets are doing. To the extent that all I’m really interested in is the maintenance overtime of the ‘real value’ of both the tax-free capital and income elements of my ISA and how best to achieve it.


Thanks for sharing that @forrado it’s really interesting to see how someone else builds their portfolio, and also the lessons you have learned.

I think it is really helpful for other people to be able to compare, and you have assembled a portfolio which would be suitable for many investors.

I think many more of us should be less concerned with the short term gyrations in the stock market too.