I hadn’t heard of passive income back when I started investing. And I’ll admit it, I was nervous when buying my first share.

After all, I grew up in an environment where stock markets were considered dangerous, risky. They were something that only rich people played with.

But now, after almost 10 years of investing, that first stock– and others like it — turned out to be a key step to retiring early in my forties.

How did I start investing in shares?

I’ll be honest, I only started thinking about buying shares when other options, like savings accounts, started cutting interest rates. The further they fell, the more I knew I would have to do something different if I wanted to continue to grow my wealth.

So, I got curious. I started learning about how stock markets worked. Sites like The Motley Fool and the like are full of useful information, and I devoured them.

I was reassured by the long-term performance of stock markets, which was vastly different to the off-putting screaming ‘buy/sell now’ over-hyped headlines.

For example, if you look at the FTSE 100 over all the different 10-year periods it has been trading, you will get a range of annual returns from -8.7% to +19%. But no individual 10-year period has ever lost an investor money.

That was hugely comforting. Plus, the average 10-year return was around a healthy 8.9%. It was time to take the plunge and buy my first ever stock.

What was my first ever passive income share?

It might surprise you to learn that my first ever passive income share was the perhaps lesser known company called City Of London Investment Group (LSE:CLIG).

Why this company? I liked its track record of dividend payments, and it had a clear strategy for the future that made sense to me.

It was also out of favour in the markets, far down from its 52-week high of ~£4. I ended up buying 558 shares at £2.49, giving a dividend yield near 10%.

In fact, if I add up all the passive income I’ve received through dividend payments, it’s more than I paid for the original investment! And that’s ignoring the fact I could still sell those shares today for a healthy profit.

Those numbers might not look much to some, but I’ve since added to this and other holdings over the years. And then that’s when the real ‘magic’ happens. Slowly and steadily, you end up owning a substantial, diversified, passive income portfolio.

The truth of risk and reward

Now, I’m not sharing this to boast about my investment success. That’s not my style and they don’t all work out so well. I’ve had my failures, too, for sure.

But the real point here is, yes, stock markets are risky. It’s one of the hard truths of investing – reward needs risk.

But by investing over the long term, those risks are far more in my favour, so long as I diversify my portfolio and choose wisely.  

And that’s why I’ll continue to invest in good companies for the long term – after all, it’s the Foolish way!

The post How passive income helped me retire (really!) early appeared first on The Twelfth Magpie.

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• The £15bn defence splurge that could send UK shares soaring in July
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• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Michelle Freeman holds shares in City Of London Investment Group. The Motley Fool UK has recommended City of London Investment Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Becoming an amateur landlord also take slots of effort, as you have the bother of doing up and maintaining the property, finding and replacing tenants, and complying with stiff regulations. You don’t have any of this if you invest regularly in a tax-free Stocks and Shares ISA instead.

Easy, easy

You can buy shares or funds in seconds, and all you need do then is check their progress from time to time. They will not call you up in the middle of the night and ask you to fix a dripping tap, for example.

I’m a huge fan of investment trusts as the very best have a fantastic track record of delivering stock market growth and constantly increasing their dividends. New figures from the Association of Investment Companies show I’m not alone, and the two most searched for investment trusts are both favourites of mine – Scottish Mortgage Investment Trust (LSE: SMT) and City of London Investment Trust (LSE: CTY).

Scottish Mortgage

Scottish Mortgage was the most viewed investment company for the third year in a row, and with good reason. The FTSE 100-listed investment company has smashed its benchmarks to return an incredible 509% over the past 10 years. If you had invested £10,000 a decade ago, you would have £60,900 today.

This £8.5bn behemoth invests in a high-conviction, global portfolio of companies, with the aim of achieving a greater return than the FTSE All World Index.

My one concern is that it is heavily invested in the US, 53% of its portfolio, to be precise, and has been flattered by the country’s lengthy bull run. Its top 10 holdings include big names such as Amazon, Tesla Motors and Netflix.

It could struggle if the US market falls, as it must do one day. However, around 20% of its portfolio is in China, where it holds Alibaba Group and Tencent Holdings, and 18% in the eurozone. With just 2.3% exposure to UK equities, it gives you ample diversification from our home market.

Better still, Scottish Mortgage has a low ongoing charges fee of just 0.37%. The downside is that it trades at a 1.4% premium to net asset value, although that is actually lower than its long-term average of 1.7%. The yield is just 0.54%. If you still believe in the US stock market, this could be a good place to buy into it.

City of London

City of London is also well worth a look. Over 10 years, it has grown 176.5%. That is less spectacular than Scottish Mortgage, but it operates in a different sector, UK equity income, which hasn’t done as well as the US. This is a great income fund though, currently yielding a generous 4.28%.

This £1.7bn fund also has low ongoing charges of just 0.39%, and trades at a premium of 1.9% to net asset value, slightly higher than its long-term average of 1.2%.

Top 10 holdings are a roster of familiar names – Royal Dutch Shell, HSBC Holdings, Diageo, BP, Lloyds Banking Group and others you will recognise.

Scottish Mortgage and City of London operate in different sectors, and could complement each other very nicely as part of a balanced portfolio.

The post Forget buy-to-let! I’d buy the UK’s two most popular investment trusts to make a million appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Tesla. The Motley Fool UK has recommended Diageo and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Yet many people do end up trying to live off the State Pension and struggle through retirement, simply because they’ve no retirement savings. According to recent research from Equiniti, around 25% of single pensioners are currently living off State Pension payments alone.

If the thought of trying to survive on less than £170 per week in retirement worries you, it’s a good idea to do something about it sooner rather than later. With that in mind, here’s a look at a simple strategy that could boost your retirement income by 25%.

An easy way to generate extra income

One of the easiest ways to generate a little extra income in retirement is through income-focused investments trusts. These are investment funds managed by professional portfolio managers (meaning you don’t need to worry about picking stocks yourself) and generate steady income by investing your money in large, well-known companies that are listed on the stock market.

Here in the UK, there are a number of investment trusts that pay high levels of income and have excellent long-term track records. For example, three that I believe are well suited to retirees are the City of London Investment Trust, the Murray Income Trust, and the Merchants Trust. These are all listed on the London Stock Exchange, meaning you can buy them through an online broker such as Hargreaves Lansdown.

All three have been around for a long time (the Merchants Trust was founded in 1889!) and all have excellent track records when it comes to paying their investors regular income, or ‘dividends’. All three also offer high dividend yields right now. For example, Merchants Trust currently yields 5.4%, while City of London and Murray Income yield 4.3% and 3.9%, respectively. The average yield between them is a healthy 4.5%.

Boosting your retirement income by 25%

So, how much money would you have to invest if you were looking to generate income of £2,191 per year (25% of the State Pension) in retirement?

Well, according to my calculations, if you put together a portfolio that consisted of these three investment trusts, you would need a total lump sum investment of around £48,700 to generate annual income of £2,192. Assuming these trusts were held in a Stocks & Shares ISA, the income would be tax-free.

In other words, with an investment of less than £50,000 you could potentially boost your retirement income by 25%. So you’d be looking at a total income of £10,959 per year, as opposed to just £8,767 from the State Pension alone. That could certainly make a difference to your lifestyle.

Of course, building up a lump sum of £48,700 in the first place is likely to be challenging for many. However, with a little advanced planning, it’s certainly possible. The key, as always, is to start saving as soon as possible.

The post Worried about the State Pension? This strategy could boost your retirement income 25% appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon owns shares in City of London Investment Trust, Murray Income Trust, and Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Easy, easy

It is far easier to invest in stocks and shares, plus you can take all your returns free of tax through your annual ISA allowance.

Lots of ordinary savers were relying on buy-to-let to generate income in retirement, but you can do this with a balanced portfolio of dividend-paying stocks and shares, or collective funds such as investment trusts and unit trusts. These five generate income of more than 4% a year and would create a balanced retirement portfolio on their own.

The list has been assembled by Laura Suter at investment platform AJ Bell, but many are regular Fool favourites, notably City of London Investment Trust (LSE: CTY), launched in 1891 and now run by Janus Henderson fund manager Job Curtis, who has been at the helm for 27 years.

Fool writer Ed Sheldon picked out this defensive dividend-paying trust in January. He praised it for increasing its dividend for more than 50 consecutive years while adding that Curtis offers a degree of stability and a consistent investment style. 

High yield, low charges

The trust targets UK equities and its top 10 holdings contain plenty of familiar names – including Royal Dutch Shell, HSBC Holdings, BP, Diageo, Lloyds Banking Group, British American Tobacco and GlaxoSmithKline. It currently yields 4.5% and has an ongoing charges figure of just 0.41% a year, which means you keep more of the income yourself.

The UK market offers some of the most generous dividends in the world, with the FTSE 100 currently yielding around 4.5% income a year. This makes it a rewarding hunting ground for income-paying funds, such as Murray Income Trust (LSE: MYI), another on the list. Again, you will notice some familiar names, including Prudential, AstraZeneca, Rio Tinto and Unilever. The yield is 4.4% and the ongoing charges figure is 6.9% a year.

Steady income

Ed Sheldon recently praised this one too, noting at the time that it was trading at a large discount of 9.6% to its Net Asset Value, although this has since narrowed to 6% as stock markets and investor sentiment have recovered. The market recovery has also boosted performance, with Murray Income Trust rising 10% so far this year.

Investment trusts are particularly attractive for income seekers because they are able to hold over some of their profits to supplement income in leaner years, but it is still worth highlighting three unit trusts that Suter has selected.

Evenlode Income is mostly invested in the UK but has 10% US exposure, while JP Morgan Emerging Markets Income offers greater global diversification, while Artemis Strategic Bond balances your stock market holdings with income from a global spread of government and corporate bonds. And they’re all far easier to buy and manage than a buy-to-let property.

The post Why would I bother with buy-to-let when these 2 investment trusts yield 4.5% a year? appeared first on The Twelfth Magpie.

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• 236 years of dividend increases! So are these 4 amazing investment trusts good for passive income?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended AstraZeneca, Diageo, HSBC Holdings, Lloyds Banking Group, and Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m looking at two of my favourite dividend-paying investment trusts. Both have a ‘defensive’ focus, meaning they should offer resilience in the current market environment.

City of London Investment Trust

For a ‘core’ investment trust holding, it’s hard to look past the City of London Investment Trust (LSE: CTY), in my view. The trust has been around since 1891, meaning that it has weathered all kinds of market conditions, and it has increased its dividend for over 50 consecutive years, which is an excellent achievement. It’s also been managed by the same portfolio manager, Job Curtis, for around 27 years now, meaning that it offers a degree of stability and a consistent investment style.

Curtis manages the trust with a conservative approach to the stock market, generally focusing on well-established, dividend-paying companies that have global operations, remaining diversified, and never taking unnecessary risks. In my opinion, this approach is ideal for current market conditions as economic uncertainty is elevated right now. The top five holdings at the end of November were Shell, HSBC, BP, Diageo, and Unilever – all companies which have been around for a long time and have good dividend track records.

Another advantage of this particular trust is its high yield, as for the current financial year, it is paying investors four quarterly dividend payments of 4.55p per share, which at the current share price equates to a yield of 4.8%. With an ongoing charge of just 0.41%, I see CTY as an excellent UK equity core holding.

Murray Income Trust

Another investment trust that has been around for a long time (since 1923) is the Murray Income Trust (LSE: MUT). Like CTY, this one has a strong focus on dividend-paying companies, and it aims to provide investors with a high and growing income stream, along with capital growth as well. It’s predominantly focused on UK equities, but it also has a little bit of exposure to stocks in Europe and the US too.

Looking at the trust’s portfolio, the top five largest holdings at the end of November were Unilever, AstraZeneca, Diageo, BP, and Shell – similar to CTY and all solid picks for current market conditions. With over a quarter of the portfolio invested across the consumer defensive and healthcare sectors, the trust should be able to offer a degree of resilience if the stock market continues to fall.

Last year, MUT paid investors a total of 33.25p per share in dividends, split over four quarterly payments, which translates to a trailing yield of 4.6% at the current share price. That’s a decent yield in today’s low-interest-rate environment and significantly higher than the yield from the FTSE 100. With an ongoing charge of 0.72%, I think this trust is a decent pick for 2019, especially as it currently trades at a 5% discount to its net asset value.

The post Two ‘defensive’ dividend investment trusts I’d buy for 2019 appeared first on The Twelfth Magpie.

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• 236 years of dividend increases! So are these 4 amazing investment trusts good for passive income?

Edward Sheldon owns shares in City of London Investment Trust, Murray Income Trust, Unilever, Diageo and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AstraZeneca, Diageo, and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, today I’m looking at two low-risk dividend investment trusts. Bear in mind that both of these trusts do invest in shares, so they’re obviously going to be more risky than holding cash in a savings account. However, both are managed cautiously, meaning that they could be a good option for those looking for low-risk stock market investments.

Standard Life Equity Income Trust

The objective of the Standard Life Equity Income Trust (LSE: SLET) is to provide people with an above-average income from their investment while also providing real growth in capital and income. Launched in 1991, the trust mainly invests in UK equities, yet may also allocate capital to fixed-income securities to supplement income or to provide stability when stock markets are volatile. The yield on the trust is currently 4% and dividends are paid quarterly.

The trust tends to hold between 50-70 stocks. As of the end of February, the largest holdings in the portfolio were Rio Tinto, Royal Dutch Shell, Aviva, Close Brothers and BP. All five of these stocks pay large dividends at present. Around a third of the portfolio was invested in FTSE 100 stocks, with just under 40% allocated to FTSE 250 shares.

Performance over five years has been good, with the trust’s net asset value (NAV) generating a return of 9.7% per year to the end of February. The ongoing charge is 0.88% per year. The fact that the trust currently trades at a small discount to the NAV, makes it an ideal low-risk investment vehicle, in my opinion.

City of London Investment Trust

Another trust that could be considered low risk is the City of London Investment Trust (LSE: CTY). Launched all the way back in 1891, this trust’s objective is to provide long-term growth in income and capital by mainly investing in UK equities.

Portfolio manager Job Curtis has been running the trust for over 25 years now, taking a cautious approach to managing investors’ money. Top holdings at the end of March were Royal Dutch Shell, HSBC, British American Tobacco, BP and Diageo, so, like the Standard Life trust above, there is a strong focus on blue-chip companies. The yield on the trust is currently 4% and dividends are paid quarterly.

Performance over the last five years to the end of March has been solid, with the trust’s NAV generating a return of 7.2%. Ongoing charges are low at just 0.42%, although this trust is currently trading at a small premium to the NAV. I believe this is an excellent trust for those with a low risk tolerance.

The post In your 60s? Consider these low-risk dividend investment trusts appeared first on The Twelfth Magpie.

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• 236 years of dividend increases! So are these 4 amazing investment trusts good for passive income?

Edward Sheldon owns shares in Royal Dutch Shell, Aviva, Diageo and City of London Investment Trust. The Motley Fool UK has recommended BP, Diageo, HSBC Holdings, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investment trusts can also hold back some of the dividend income they earn, allowing them to top up dividend payments to shareholders in leaner years — something unit trusts cannot do. This makes them less likely to cut distributions to shareholders, making them a popular choice for investors seeking safe and steady income.

Long track record

The City of London Investment Trust (LSE: CTY) is a great example of how reliable dividends from investment trusts can really be. With 50 consecutive years of dividend increases under its belt, the investment trust boasts one of the longest track records of dividend growth.

City of London invests primarily in UK stocks, with the aim to provide shareholders with long-term growth in both income and capital. It’s a fund that’s mostly invested in the big FTSE 100 companies, with sizeable positions in Royal Dutch Shell (5.9%), British American Tobacco (4.7%), HSBC (4.7%), Diageo (3.3%) and BP (3.1%).

Financial stocks dominate its portfolio, with a 26% sector weighting, and this is followed by consumer goods (20%) and consumer services (12%).

Market-beating yield

One thing which really sets this investment trust apart from other funds that have multi-decade long track records of dividend growth is its high dividend yield. At present levels, shares in the fund offer a prospective yield of 4.2%. This high yield not only beats the vast majority of equity income investment trusts, but also the weighted average FTSE 100 yield of 3.9%.

On the downside, shares in City of London currently trade at a modest 3% premium to its net asset value (NAV), reflecting strong demand among investors.

6.4% yield

For investors looking for even higher yields, Invesco Perpetual Enhanced Income (LSE: IPE) may be worth a closer look.

This trust invests in an internationally diversified portfolio of high yielding corporate and government bonds, and offers prospective investors an impressive dividend yield of 6.4%. It’s not an investment suitable for everyone, but for those with a higher risk tolerance, this trust offers an attractive high yield in what is still a low interest rate environment.

Risk of default

High yield bonds are riskier than investment grade bonds as the risk of default is usually greater. They also exhibit more price volatility, but when the economy is healthy and default rates are low, high yield bonds can pay back much higher returns than their investment grade counterparts.

The recent performance of the trust is solid, with NAV total returns of 55.9% in the five years to the end of December. And following a dividend cut in 2009, the trust has consistently paid 5p in dividends to shareholders in each year. 

Despite recent volatility in the bond market, shares in the high yielding trust remain popular as they also currently trade at a 3% premium to its NAV.

The post Hungry for income? Consider these high-yielding dividend investment trusts appeared first on The Twelfth Magpie.

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• 236 years of dividend increases! So are these 4 amazing investment trusts good for passive income?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I can understand why this happens. When the market is rising, it feels good to be an investor. But when the market is plummeting, it doesn’t feel so good. No one likes doing something that doesn’t feel good.

Yet the thing is, if you want to be a really successful long-term investor, you have to think differently. You have to be able to go against the herd. Experienced investors understand that often, when everyone else is panicking because the stock market is falling, it can actually be a fantastic time to go for it. Just ask Warren Buffett, who advises investors to be “greedy when others are fearful.”

So is now a good time to invest your first £1,000?

More for your money

If you have been thinking about starting an investment portfolio this year, but haven’t got around to it yet, you’re in luck. Stocks are now considerably cheaper than they were a month ago.

In mid-January, the FTSE 100 was at an all-time high. It was within touching distance of 7,800 points. However, now, it’s back under 7,200 points.

This means that you can now get more for your money. £1,000 invested in the market today will buy you more stocks than it did a month ago.

For example, when I wrote the article ‘How to invest if you only have £1,000′ back on 7 January, one investment trust I earmarked was The City of London Investment Trust. This is a great one for beginners, as it holds a diversified portfolio of blue-chip stocks and is managed with a cautious approach. At the time, the trust was trading at 441p per share. So an investment of £1,000 would have bought you 226 units.

However now, that same investment trust is trading at 408p. That means, if you were to invest £1,000 today, you could pick up 245 units for the same price. That sounds like a good deal to me. Ultimately, picking up more units at a lower valuation means a higher chance of a profit over the long term.

Bigger dividends

Another benefit of investing now is that dividend yields are higher than they were a month ago. You see, there’s an inverse relationship between share prices and dividend yields. When shares prices fall, dividend yields rise.

Using The City of London Investment Trust as an example, on 7 January, its dividend yield was 3.8%. However, at today’s price, the yield is 4.1%. That means higher dividend payments for you.

So given that you can now buy more for your money than you could a month ago, and pick up higher dividend yields in the process, now does appear to be a good time to get started in the investment world.

Of course, the stock market could continue to fall further. For this reason, it could be sensible to invest your first £1,000 in several instalments over time.

The post Is now the right time to invest your first £1,000? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon owns shares in The City of London Investment Trust. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing overseas, outside of your home market, is essential if you want to achieve the best returns as it allows you to benefit from growth in faster-growing economies such as China, India or regions such as South America. 

However, it can be daunting and complicated, so it’s best left to the experts. Luckily, there are plenty of highly experienced overseas investment managers out there who have a record of outperformance. 

Asian exposure 

The Scottish Oriental Smaller Co‘s (LSE: SST) investment trust, is a perfect example of the benefits of investing overseas. The investment objective of the company is to achieve capital growth by investing mainly in smaller Asian quoted companies. The investment firm invests in China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam. So, if you’re looking for a bet on Asia’s economic growth, Scottish Oriental ticks most of the boxes. 

During the past 10 years, the fund has produced a return of 230% for investors excluding dividends. Over the same period, the FTSE 100 and FTSE 250 have returned 13% and 76% respectively. 

Asia’s economic growth is only just getting started, and the region is still relatively underdeveloped. As growth continues, small companies will profit, and Scottish Oriental should continue to produce returns for investors. Right now, shares in the firm are trading at 1,050p compared to a net asset value per share of 1,203p, a discount of 12.7%. 

Diversified income 

As Scottish Oriental tries to profit from smaller companies, City of London Investment Trust (LSE: CITY) is focused on generating income here in the UK but also has some global exposure. 

City of London is primarily a UK income trust. It has matched its benchmark, the UK Equity Income index, over the past five years, and currently yields 3.95%. 

Most importantly, this trust is cheap for investors to own. Total annual operating charges are 0.42%. For some comparison, Neil Woodford’s flagship equity income fund charges 0.75% and yields only 3.5%. 

So, if you’re looking for a cheap, diversified income buy, then I don’t think you can go wrong with City of London. Shares in the trust trade at around net asset value, which was last reported at 422p per share. 

Interestingly, while 90% of the fund’s assets are devoted to UK equities, notably FTSE 100 dividend champions, around 10% of the portfolio is invested overseas. As well as the UK the fund is invested in the US, Netherlands, Germany, and Hong Kong so there is some international diversification here. 

The bottom line 

Overall, both the Scottish Oriental and City of London funds look to me to be good investments for different reasons. Scottish Oriental offers exposure to a fast-growing region of the world with a proven management team. Meanwhile, City of London provides a diversified income stream at a low cost. 

The post Two top-performing investment trusts for long-term investors appeared first on The Twelfth Magpie.

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• 236 years of dividend increases! So are these 4 amazing investment trusts good for passive income?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2017 is almost over. However, if you were thinking about starting a share portfolio this year and haven’t got around to it yet, don’t stress. There’s still plenty of time. With that in mind, here’s two stocks that I would certainly consider buying if I was starting a share portfolio today.

Diversification is key

New investors often face one main problem when they start out. Every single financial textbook recommends ‘diversifying’ your funds over many different stocks when investing in shares. However, when we start out, we often don’t have enough capital to buy a whole portfolio of stocks.

The solution? Investment trusts – securities that can be bought and sold in the same way as shares, but actually consist of a portfolio of stocks, meaning that you get access to a diversified share portfolio with just one trade.

One popular option, and one that I hold myself, is the City of London Investment Trust (LSE: CTY). This is a diversified portfolio of nearly 120 stocks that aims to provide long-term growth in income and capital by investing in UK-listed companies. It is filled with blue-chip names such as such as Royal Dutch Shell, HSBC Holdings, Lloyds Banking Group and Unilever, meaning that investors get exposure to some of the world’s largest companies through just one holding.

One of the main appeals of this specific investment trust is its fantastic dividend history. Indeed, the dividend payout has increased every year for over 50 years in a row, a remarkable track record. Last year the payout was 16.7p, which is a dividend yield of 3.9% at the current share price.

I see the City of London Investment Trust as a core portfolio holding, and I plan to keep holding it, and enjoying the regular stream of dividends, for a long time to come.

A dividend champion

For those happy to take on the risk of owning individual companies, I believe British American Tobacco (LSE: BATS) has many key attributes of an ideal starter stock.

Founded in 1902, the company is one of the largest tobacco firms in the world, selling its brands in over 200 countries worldwide. The tobacco giant has an outstanding track record of generating shareholder wealth, and with the key acquisition of Reynolds American under its belt, and some innovative new products in its portfolio, I see no reason why it can’t continue to generate attractive returns, despite health concerns over smoking.

It also has a fantastic dividend track record, having increased its dividend payout by over a third in the last five years alone. City analysts forecast 8.5% and 9.2% increases in the dividend this year and next, with this year’s expected dividend payment of 184p meaning a dividend yield of 3.7% at the current share price.

The stock enjoyed a strong 18-month share price run up to June, trading above 5,600p for a while, but in recent months the price has pulled back by a considerable margin. At a price of 5,000p today, the stock’s forward P/E ratio is 17.8, a valuation that looks reasonable to me, given the company’s excellent track record.

The post Two top buys for a starter portfolio appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in City of London Investment Trust and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended HSBC Holdings, Lloyds Banking Group, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.