How time flies when you are enjoying yourself as a personal finance journalist. I can’t believe that nearly 30 golden years have passed since I first started writing about the virtues of investment trusts. I remember my journalistic investment trust ‘debut’ all too well – the writing of numerous articles for a special report commissioned by The Guardian newspaper. It involved a trip up to Edinburgh, a centre of investment trust excellence, to interview a number of key trust managers.

Within a tight radius of the City’s famous Charlotte Square, at the time the hub of Edinburgh’s investment community, I was able to pick the brains of some of the sector’s big players.

Of course, a lot of water has passed under the bridge since 1986. Stock markets have had their crashes and steep rises, the investment trust industry has had a few issues to overcome and a number of the companies I met 30 years ago are no more – taken over by rivals. Aberdeen has been part of this process, absorbing trust houses Dunedin and Murray Johnstone along the way.

But through 30 years of thick and thin the attractions of investment trusts for private investors have remained compelling. So, if you want to generate long term wealth from a portfolio of investments, then investment trusts have to be for you.

Indeed, with the rise of online investment platforms, allowing investors to buy – and sell – investment trusts easily and cost effectively, I would say the case for holding investment trusts is now stronger than back in 1986. Especially given that these platforms routinely allow trusts to be held tax-efficiently, either through an Individual Savings Account or a pension (typically a self-invested personal pension). Let me spell out in simple terms what I see as the key benefits of investment trusts.

Durability

Although we are regularly told by City regulators that past performance is no guide to the future, it has to be reassuring that some investment trusts have been making money for investors (shareholders) since time immemorial.

The oldest in fact, Foreign & Colonial, has been generating shareholder returns for 148 years. Like many long standing trusts, it has done this in an unassuming way, quietly making its investors (more often than not) a little richer every year.

Over the past one, three, five and ten years, this global fund has outperformed the FTSE All-Share Index – the benchmark against which all UK investors should judge their investments. It’s also delivered 44 consecutive years of dividend increase – a reassuring record for those who like their investments to deliver a rising income.

Foreign & Colonial is not unique. According to the Association of Investment Companies, there are 24 investment trusts that have been around for more than 100 years, between them managing more than a fifth of the industry’s assets.

Like Foreign & Colonial, most go about their work in an efficient manner, putting shareholder interests first. Many have names associated with their past – the likes of Bankers, Merchants and Scottish American. Most offer exposure to global equity markets or just the UK stock market – ideal for investors, perfect for first-time investors. Some are even managed by Aberdeen – the likes of Dunedin Income Growth and Murray International.

Softly, softly, catchee monkey is their investment modus operandi.

Diversity

Investment trusts come in all shapes and sizes. But what binds them as one is that they all provide investors with exposure to an underlying portfolio of diversified holdings.

Some portfolios are more concentrated than others, comprising no more than 30 stocks (others have stakes in more than 100 businesses). Some trusts invest in companies listed on specific markets (the UK, for example) or in a particular geographic region (Asia Pacific, for example).

Diversification is not a magical investment tool guaranteeing stellar returns. But it’s a building block towards successful investing and very much the basis upon which all investment trusts are run. Diversification should frame your investment portfolio.

Accountability

Not many people make a virtue of this, but I think it’s reassuring that the way investment trusts are managed is subject to close scrutiny.

Like all stock market listed companies, trusts are run by independent boards whose overriding duty is to bat for shareholders (investors). This results in the investment manager being regularly held to account – and told to buck up their ideas if they are not performing satisfactorily.

Indeed, boards do occasionally replace investment managers – not just the individual but the fund management company – if they think change is necessary. Investors are also able to attend the annual general meeting and trawl through the published report and accounts. Nothing is hidden. Transparency rules. All very reassuring as far as investors are concerned.

Cost

No two investment trusts are the same but it is a fact that ongoing charges – that diminish investor returns – for trusts are typically lower than for other collective investment vehicles (unit trusts or OEICS for example).

It means more of the overall return – a combination of capital and income – that is generated by the investment trust ends up boosting your long term wealth, rather than the profits of the investment manager.

Income

For many investors, dividend income is the holy grail. It has become even more important over the past seven years – post the financial crisis – as interest rates have remained at rock bottom, savaging rates available on most cash accounts.

Investment trusts with an income bent have an uncanny ability to deliver a stream of rising income. This is because of their ability to put away income in the good years – into reserves – so they can top up dividend payments to shareholders when companies they hold are struggling to maintain dividends.

This smoothing process works effectively. There are 36 investment trusts that have grown their annual dividend payments every year for the past 10 years. Fifteen, quite remarkably, have recorded 30 years of consecutive annual dividend increases. If you want a list of them, email [email protected].

Usability

What is wonderful about the internet is that it now allows investors to manage their investment portfolios online, including ISAs and pensions. All can be administered by the same fund platform provider.

Sight of the end of the tax year (April 5) always encourages people to think about utilising their ISA allowance (£15,240 for the current tax year) and maximising pension contributions (£40,000).

With the Chancellor of the Exchequer reviewing the tax incentives available to investors, I would make hay with ISAs and pensions while the sun shines.

Invest shrewdly. Invest monthly if you can afford to. And don’t forget investment trusts in the product mix.

Find out more about Aberdeen Investment Trusts