As an avid follower of investment strategies, my fondness for income-generating investments is no secret. My preference leans towards options that offer a growing income, rather than those that remain stagnant and vulnerable to the erosive effects of inflation.

On the topic of inflation, we all hope the Bank of England fulfills its pledge to reduce it to 2 percent as swiftly as possible—ideally this year, rather than the next.

My penchant for a good deal naturally steers me towards stock market-listed investment trusts. These financial instruments provide access to a diverse array of assets and stock markets tailored to individual interests.

With an investment trust, the global market truly becomes your playground. You have the flexibility to invest in trusts that focus on companies listed on the UK stock market or venture into funds that target burgeoning markets such as India and Vietnam.

To me, these collective investment vehicles offer exceptional value in numerous respects.

In my eyes, these collective investment vehicles represent bargains on many fronts.

For a start, the ongoing annual charges they levy (expressed as a percentage of the assets managed) tend to head down rather than upwards – a result of being overseen by independent boards, the best of which demand that the investment managers appointed to run the trust’s assets consistently provide value for money.

They can also be a bargain if you are able to buy shares in them at a discount to the value of their underlying assets. This gives you more buck for your money and works in your favour if the discount subsequently falls away.

Jeff Prestridge has put together a portfolio of investment trusts for the New Year

Last week, to celebrate the new year, I sat down with a double espresso and assembled a portfolio of investment trusts where each fund ticks three key Prestridge boxes – a portfolio fit for 2026 and way beyond.

First, each trust must have a record of annual dividend growth going back at least ten years.

Although this record could be broken in the future, I know that all trusts which have earned the ‘dividend hero’ badge of honour from the industry’s trade organisation for racking up at least ten years of divi growth don’t want to lose it in a hurry. It marks them out as income-friendly.

Also, it mustn’t be forgotten that all trusts have the power to tuck away some of the income they earn from their portfolio holdings so it can be used at a later date – maybe to support dividends to shareholders when corporates are struggling to reward their investors with income payments. This makes them far more income-friendly than unit trusts.

Secondly, its annual charges must total less than 1 per cent. And finally, the fund’s shares must be standing at a discount to the value of the underlying assets. In summary, each trust has annual income growth ingrained into its DNA, isn’t egregious when it comes to imposing management charges on investors’ holdings and its shares can currently be bought on the cheap.

Near investment perfection, then – although nothing is 100 per cent perfect in an imperfect investment world.

Here’s the ten-strong trust portfolio I have come up with. You might like bits of it – that’s fine.

You might like to invest in stages – on a monthly basis for example, rather than in one go. That’s also OK, although the discount will change from month to month. And if you are inclined to invest, do think about using tax-efficient vehicles such as Isas, Jisas (for children) and pensions (for you and your children).

Scottish Mortgage shareholders would benefit if Musk’s SpaceX floats on the US stock market this year

Buying British

Aberforth Smaller Companies and Mercantile are my two UK picks. Aberforth is a super Edinburgh-based investment house which specialises in UK smaller companies. It doesn’t court publicity, preferring to concentrate its resources on delivering results.

The trust has outperformed the average for its peer group over the past three and five years. Although five-year returns are modest at 48 per cent, it is well positioned to benefit from any rerating of UK smaller companies’ stocks. Annual total charges are 0.78 per cent, while its shares sit at a 9.8 per cent discount.

The £1.2billion trust has 14 years of income growth tucked under its belt and the annual dividend yield is just below 2.8 per cent.

Mercantile is run by JP Morgan Asset Management and invests in medium and smaller UK companies rather than FTSE100 giants.

Like Aberforth, it has struggled to excel because of its focus on parts of the UK stock market currently out of favour. But it could do well if the economy starts to grind its way into growth mode (despite Labour’s best efforts to grind it into the ground).

Five-year returns are 23 per cent, annual charges are 0.48 per cent, and the shares sit at a 9.4 per cent discount. Dividends have risen for 12 consecutive years, and another year of income growth will be notched up when it declares its final quarterly dividend for the year to the end of this month.

Global

Three global trusts tick the three Prestridge boxes: Brunner (managed by Allianz), The Global Smaller Companies Trust (Columbia Threadneedle) and Scottish Mortgage (Baillie Gifford).

Their shares currently stand at respective discounts of 8.8, 6.1 and 9 per cent, and the three dovetail quite nicely in terms of exposure to global stocks.

Brunner has more than a fifth of its assets in UK companies – unusual for a global fund – while also holding big positions in American tech companies such as Alphabet and Microsoft.

Scottish Mortgage’s differentiator is that 29 per cent of its assets are invested in private listed companies – such as the likes of Elon Musk’s SpaceX – while among its top ten holdings are Amazon, Meta and Nvidia.

Global Smaller Companies does exactly what it says on the tin – investing in smaller firms across the world, either directly or through funds.

Charges for the three funds are respectively 0.63, 0.62 and 0.31 per cent and they have grown their dividends for 53, 55 and 43 years.

Of the three, Scottish Mortgage has the most wretched five-year performance record with losses of 0.1 per cent. But its shareholders would benefit massively if Musk’s SpaceX floats on the US stock market this year, as expected.

Rest of the world

Two Asian picks, a European fund and an income-focused North American trust complete the overseas exposure of my portfolio.

Aberdeen Asian Income and Fidelity China Special Situations (maybe not everybody’s cup of tea) respectively have 16 and 14 years of dividend growth under their belts.

North American Income, now managed by Janus Henderson, and BlackRock Greater Europe have 14 and 19 years of growing annual income.

The Aberdeen fund offers the most attractive dividend yield at 5.4 per cent, while North American Income has the lowest annual charges at 0.77 per cent.

The last piece

RIT Capital Partners completes the set. Like Scottish Mortgage, a chunk of its portfolio is in private (unlisted) investments.

But it also invests in other assets, such as government bonds and absolute return vehicles.

It’s managed by J Rothschild Capital Management and has grown its dividends for 12 consecutive years.

Of all the ten trusts, its shares stand at the largest discount (22 per cent). But it has been in narrowing mode in recent months. Still a bargain though.

Wishing all of you a super wealth enhancing 2026.