Overall then we think this is a good illustration of how a few reliable investment trusts held for the long haul can grow one’s capital and income in real terms. As we noted earlier, ‘real returns’ is a phrase much bandied around these days, but there aren’t many places one can go to test the historical accuracy of any claim to have achieved it.

Conclusion

One of the conclusions of all this is, well you know, that thing we keep talking about. Something to do with eggs and baskets. Diversification matters and as all the examples above show, even a little bit of diversification can help smooth things out, especially as we don’t in real life get to pick the perfect hindsight portfolio.

Second of all, equity income doesn’t have to come from trusts specifically labelled as such. Of course, having such a label puts the onus on the trust to deliver, but adding lower yielding trusts that might grow dividends faster could, in the long haul, pay off.

One just needs to be mindful that higher starting yields today may come at a cost tomorrow, and lower starting yields may pay off eventually, although there are clearly no guarantees.

Last of all, while we noted above that picking 25 years was somewhat arbitrary, that’s not wholly true, as it’s about 25 years ago that investment trusts were confronted by the uncomfortable reality that many of their institutional shareholders had outgrown their ownership of investment trusts and wanted to sell. Boards were, at the time, grappling with a change to the tax rules that opened the door to widespread share buy-backs, wide discounts were quite normal and corporate activity was a seemingly daily occurrence. All of which has quite a contemporary ring to it. But those investors that held their nerve back then did OK, didn’t they?