5 ways Investment Trusts can supercharge your ISA in 2025
By Boring Money
6 Feb, 2025
This content is a paid promotion and has been created in collaboration with Lazard. It is an advertorial designed to promote Mid Wynd International Investment Trust plc. While we strive to ensure the information provided is accurate and relevant, it reflects the views and messaging of the sponsor.
When it comes to investing, few strategies are as powerful and tax-efficient as investing in a Stocks & Shares Individual Savings Account (ISA). Income - including dividends and interest - and capital gains from investments are completely tax-free in an ISA. Over time, this can boost the growth from investments thanks to the compounding effect - where your earnings generate their own earnings, as nothing is lost to tax.
Investors can put their money to work in shares of companies listed on stock exchanges, corporate bonds, government bonds, and investment funds. Funds include many distinct advantages, including the opportunity to diversify across regions and asset classes, access specialist markets, and reduce volatility, without the costs and complexities of managing individual securities.
But what type of investment fund should investors pick? Whether you’re an experienced investor reviewing your investment portfolio, or you’re just starting your journey and looking for inspiration, here are five compelling reasons to include Investment Trusts in your ISA in 2025.
1. Juice your income or choose growth
Investment Trusts often aim to provide higher dividend yields compared to other investment fund options, such as unit trusts or exchange-traded funds, making them appealing for income-focused investors.
Many Investment Trusts have explicit policies aimed at providing attractive and growing dividends – i.e., regular payments - to shareholders. These policies can include targeting higher-yielding investments and managing the portfolio to maximise income generation.
Furthermore, Investment Trusts can retain up to 15% of their income. Setting aside income in good years can allow them to pay out dividends in leaner years. This can help them provide more regular income streams.
Alternatively, some Investment Trusts focus on growth by investing in companies that reinvest their earnings for future expansion rather than distributing them to shareholders. These growth-oriented Investment Trusts target businesses with strong potential for capital appreciation, innovation, and market leadership.
Investors in these trusts may not receive regular income in the form of dividends but can benefit from significant capital growth over the long term as the value of their investments increases. This strategy is particularly appealing to those with a longer investment horizon who are seeking substantial growth and are willing to forgo immediate income for potentially higher long-term returns.
2. Harness the power of professional management
Investing can feel overwhelming, especially if you don’t have the time or expertise to monitor markets. That’s where Investment Trusts shine.
Managed by professional fund managers, Investment Trusts pool investors’ money into a diversified portfolio of assets. These managers use their expertise to make informed decisions, saving you time and effort while aiming to deliver strong returns that outperform the market.
Another perk of Investment Trusts is that they have an independent board of directors. It is their job to monitor the decisions of the fund managers and protect shareholders’ interests.
“One of the key benefits is the high level of accountability provided by an independent board of directors, who play a crucial role in overseeing the management and operations of the Investment Trust,” explains David Kidd, Chairman of the Board of Directors at the Mid Wynd International Investment Trust Plc.
“Ultimately, the board aims to maximise shareholder value and safeguard their investments. This may offer some much-needed reassurance to investors especially during turbulent and uncertain times.”
3. Diversification without the hassle
A well-diversified portfolio is a component of successful investing, but building one yourself can be tricky. That’s where Investment Trusts might make it easy.
These funds often have the flexibility to invest in a wider range of asset classes compared to other collective investment schemes, from stocks and bonds to property and even alternative markets. You can select a trust which reflects your investment goals, values, and risk appetite, while the built-in diversification spreads your risk and potentially reduces the chance of a nasty market dip wiping out the value of your portfolio.
“Within Investment Trusts, you can find an investment approach that resonates with how you want to invest, whether you are seeking growth, income, capital preservation, or a blend of these,” Kidd explains. “Mid Wynd International focuses on growth by investing in quality stocks, companies that generate high returns on capital and can reinvest that capital back into their business to grow into the future.”
“The portfolio aims for diversification across sectors, industries, regions, and competitive advantages,” Kidd adds. “The portfolio managers believe this is critical in delivering long-term performance.”
By holding Investment Trusts in your ISA, you’re essentially gaining access to a ready-made, professionally managed, and diversified portfolio - all while enjoying the tax-free benefits of an ISA. It’s an efficient way to reduce risk while maximising your growth potential.
4. Follow the beaten track
Investment Trusts often have long track records, providing a level of stability and trust that can be reassuring to investors. Many Investment Trusts have been around for decades, some even for more than a century. These long histories can provide a wealth of performance data and demonstrate a trust’s ability to pay dividends reliably, and navigate various market cycles and economic conditions.
Unique to Investment Trusts is their closed-end structure, which means they have a fixed number of shares. This allows fund managers to take a long-term view and ride out market gyrations, providing greater stability and potentially better performance during periods of market volatility.
Investors can buy or sell shares of the investment trust on the stock exchange, similar to trading individual stocks. However, the transaction costs associated with buying or selling shares are borne by the individual investor, rather than being spread across the fund, as is typically the case with open-ended funds.
5. A smart investment for uncertain times
In a world currently gripped by uncertainty and geopolitical turmoil, Investment Trusts – managed by experts and overseen by an independent board – could make an even more compelling investment opportunity.
The team behind Mid Wynd International believes the case for investing in a trust which focuses on quality investments with a long-term lens is prudent.
“We believe the Mid Wynd International Investment Trust is well suited to investors with a long-term investment horizon and an eye on quality growth,” says Kidd. “Companies that can generate high returns on capital and reinvest a significant portion of those returns back into their business to drive future growth should see their share price climb over time.”
“Right now, we believe quality companies present an attractive risk/reward compared to other options in the market, especially so given the path ahead still feels very much uncertain," explains Kidd.
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