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Most Stocks and Shares ISA investors are likely to make money this year. With less than 12 weeks of 2026 remaining, the S&P 500 and FTSE 100 are up 13.5% and 8.3% respectively, with dividends on top.
Many ISA investors hold investment trusts, some of which have done even better recently. Here are two that I think are worth considering buying for the next five years.
High growth and income
The portfolio of Manchester & London Investment Trust (LSE:MNL) is concentrated really heavily around firms at the epicentre of the AI infrastructure buildout. Here are its current top 10 holdings:
| AI Bucket | % of net asset value (NAV) | |
|---|---|---|
| Nvidia | AI compute | 11.5% |
| TSMC | Chip foundry | 11.2% |
| Broadcom | Compute and networking | 9% |
| SK Hynix | Memory | 8.6% |
| Micron | Memory | 8.3% |
| Coherent | Optical components | 5.7% |
| Lumentum | Optical components | 5.2% |
| Ciena | Optical networking | 5.2% |
| Advanced Micro Devices | AI compute | 5.1% |
| Marvell Technology | Connectivity and compute | 4.8% |
The growth trust has delivered an excellent five-year total annualised return of 15%. However, the stock’s down 15% since peaking in June and currently trades at a chunky 31% discount to NAV. There’s also a 4.1% dividend yield.
Of course, the technology’s developing rapidly and more people are getting worried. So there’s always a chance that stricter regulation comes in and slows AI adoption, hurting valuations across the board.
Speaking of which, global chip stocks nosedived yesterday (12 October) over worries about AI financing. As I write, the Manchester & London share price is down 5%, showing how volatile the trust can be day to day.
However, key portfolio holdings are reaping the rewards from the AI boom and look well placed to keep on doing so, at least for the foreseeable future. Micron recently reported quarterly revenue of $54.2bn, up 379% year on year.
Meanwhile, Nvidia’s guiding for $108bn of revenue in the next quarter – 89.5% growth! Yet SpaceX has emerged as a major buyer of the firm’s products, particularly the next-generation Vera Rubin platform. So amazingly, Nvidia’s growth could be even higher.
With Manchester & London, investors are being offered broad, discounted exposure to the AI revolution, as well as a decent level of income. So I think the shares are worth considering adding to a diversified ISA.
For centuries, labour has been the single largest component of the global economy. With roughly $55trn spent annually on human capital today, there is a massive TAM [total addressable market] for Agentic AI as a direct substitute for human labour.
Manchester & London
Steady growth and income
If AI sounds a bit too dicey, then the City of London Investment Trust (LSE:CTY) could be more up your alley. The FTSE 250 trust aims to provide “a dependable and growing income from leading UK companies“.
It has certainly delivered that, with a tremendous 60 years of consecutive dividend growth under its belt. This is the longest track record of any investment trust.
Top holdings today include HSBC, Shell, BAE Systems and British American Tobacco, which are all truly global businesses. The portfolio also contains leading domestic companies such as Lloyds and Tesco.
While City of London’s share price has jumped 36% in the past two years, the yield’s still attractive at 4%.
One risk I see is a big exposure to the UK financials sector inside the portfolio. Performance could therefore suffer during some sort of financial system meltdown.
That said, I like that the managers take advantage of the investment trust structure to retain some income in stronger years to build up reserves. While nothing’s guranteed, this prudent approach should make the income more reliable.
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Ben McPoland owns shares in BAE Systems, HSBC, Nvidia, SpaceX, and TSMC.
This story originally appeared on Motley Fool
