I realised at some point that I was limiting my investing options by restricting my chosen investments to those that provided an adequate natural yield - say 3% minimum. This had ruled out looking at the likes of Vanguard LifeStrategy funds with a natural yield of under 1.5% for example. I think also I was holding too many UK-focused income trusts.
My managed investment trusts have provided mixed returns in recent years. The ones which have delivered for me are Nick Train’s Finsbury Growth & Income, smaller company specialist Aberforth, Edinburgh & City of London and these have obviously been retained. I have added a few additional trusts to provide more diversity - HICL Infrastructure, TR Property and Capital Gearing and these have been included in the updated comparison.
I find investment trusts less volatile than individual shares however, they do use varying amounts of gearing and can trade at a premium or discount to their NAV so they are a little more complex. Against this is the advantage for the investor who requires income of their ability to pay a steadily rising dividend steam due to their being able to hold back excess income in reserves during good years.
The fortune of the trusts are always dependent on the managers making consistently good calls - some appear to be reasonably competent and some a little more average.
Here is my basket of 9 investment trusts showing returns over the past 5 yrs to mid June 2017.
I am pleased to see the basket of managed investment trusts are still doing the business and have delivered an additional 3.7% return compared to my Vanguard funds. The basket used for the comparison last year would provide a reduced average return of ~12.5%.
I think it is clear that some managed trusts can add value to a portfolio and it is therefore worth paying the extra charges but of course it is difficult to identify in advance which of the 400+ on offer will continue to outperform. Some of the trusts I selected when I started my investment trust income portfolio have fallen short of my low cost index funds - for example Aberdeen Asian Income, New City High Yield, Murray Income and Dunedin Income. Maybe luck plays a big part in the investing process!
Having replaced a few trusts in the past 12 months, I am happy to continue with my combined managed and passive 50:50 mix for the time being. The pendulum seems to be swinging towards low cost passives in the debate as to which is the better option for small investors but from my experience so far, it does not need to be one or the other but can be both.