LONDON -- If recent market turbulence has taught us one thing, it is that we should respect the power of the dividend. Like a Duracell battery-powered toy, the income keeps banging away after those whizzy growth stocks have run down.

As I recently discovered, it is easy to go overboard on equity income -- and that's what I'm about to do. I want to dive into some nicely diversified equity income funds with low charges and hefty yields, preferably between 4% and 6%.

And then I want to invest for growth, year after year -- at least 20 years, in fact, and possibly beyond.

Give it some stick
I already hold two equity income funds. Inevitably, one of them is Invesco Perpetual Income, run by you-know-who (Neil Woodford, in case you don't). The other is Rathbone Income, managed by Carl Stick.

They're both good funds, returning 53% and 57%, respectively, over the past three years. The trouble is that they're both unit trusts with pricey total expense ratios, or TERs, of 1.68% and 1.56%.

Those charges take a hefty bite out of the funds' annual yields of 3.8% and 4.13%. (As an aside, it's interesting how Rathbone wins on growth, TER and yield.)

One alternative is to simply top up my portfolio of dividend-yielding stocks such as GlaxoSmithKline, Royal Dutch Shell, and Vodafone.

But this time I'm looking to see whether an investment trust (or three) can do the job instead.

Income at a premium
One drawback with dividend-paying investment trusts is that they tend to trade at a premium. Good examples are City of London Investment Trust, which has increased its dividend for 44 consecutive years, and Neil Woodford's Edinburgh Investment Trust (LSE: EDIN.L). Both trade at a premium of around 2% to 3% of net asset value.

That shows how highly investors prize them, but I don't like buying trusts at a premium, especially since it knocks the yield. I want a discount, please.

So what did I find?

From little acorns...
I started my search in the UK High Income investment trust sector and stumbled across an investment trust I had never heard of before, called Acorn Income Fund (LSE: AIF.L), from Premier Asset Management.

This fund has already grown into a mighty oak, returning 198% over the past three years. It also yields 4.52% a year. Despite that, it is trading at a discount of more than -15%.

Why?

John McClure's fund is 75% invested in smaller companies and is clearly making some big calls, with its largest holding, RPC Group, making up nearly 9% of the fund, while Fool favorite James Halstead totals 8%.

In fact, its top 10 holdings make up 50% of the fund. Diversified it ain't.

That explains its sharp outperformance (its benchmark UK high income sector delivered 88%), as well as its high TER of 2.41%.

Small Companies Dividend Trust (LSE: SDV.L), from Chelverton Asset Management, has returned 162% over three years, yields 6.4%, and trades at a -3% discount. Again, the TER is the blow at 2.46%.

Both funds look impressive, if you think now is the right time to invest in small companies -- and if you can stomach those charges.

True blue
Next stop: UK Growth & Income, home of solid blue-chip funds such as the top-performing Troy Income & Growth Trust, which returned 112% over three years and yields 3.6% -- but trades at a 4% premium. Curses!

Lowland Investment Company returned 109% over three years. It trades at a narrow -3% discount and yields 3.1%, with a low TER of 0.74%. I fancied a wider discount and bigger yield, but this looks like a contender.

Shires Income, from Aberdeen Asset Management, boasts a spiffing 6.5% yield and has returned 98% over three years, but it also trades at a small premium. Am I getting too hung up on this premium thing? It rules out another brace of income goodies: Edinburgh Investment Trust and Murray Trust, both from Aberdeen.

A -6% discount, a 6% yield, and a 0.66% TER? That has a devilish symmetry to it, which is why I might go shopping for Merchants Trust (LSE: MRCH.L), which invests in a portfolio of FTSE 100 faves, including BP, HSBC, British American Tobacco, BAE Systems, SSE, BT and National Grid.

Performance has been mid-table, rather than market-beating, matching the sector average by returning 60% (another six!) in three years. But its solid blend of stocks is highly appealing to me.

International velvet
Finally, to the International Growth & Income sector. Scottish American Investment Company, from Baillie Gifford, is a standout here, returning 85% over three years and yielding slightly more than 4%. It is trading at a small discount with a 1.08% TER.

Murray International, from Asia specialist Aberdeen Asset Management, yields 4.1% but is trading at a whopping 5.9% premium. TERs tend to be higher in the international sector, and Murray charges 1.23%.

Bankers Trust, from Henderson Global Investors, is an international fund with large UK exposure and a relatively humble three-year return of 43%, which explains the -11% discount. The yield is a bit soppy at just over 3%. Its TER is a lowly 0.42%, but low charges aren't everything.

My favorite here is the British Assets Trust (LSE: BSET.L), two-thirds invested in UK shares. It is up 58% over three years and yields a juicy 4.9%. It trades at a small -2% discount and has an acceptable TER of 0.74% and a track record that stretches back to 1898.

In trusts we trust
There is no single fund out there that meets my criteria. The best performers inevitably trade at a premium. Right now, I'm leaning toward Merchants Trust, British Assets, and Acorn Income.

Or do you have a better idea?

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Harvey Jones owns shares in BP, GlaxoSmithKline, Shell and Vodafone. Motley Fool newsletter services have recommended buying shares of Vodafone Group, GlaxoSmithKline, and National Grid. The Motley Fool has a disclosure policy.
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