Looking for your first investment? Consider these growth and income trusts

Jack Tang — Sat, 10 Feb 2018 12:30:13 +0000

With so many things to consider before you make you take the investment plunge, investing can seem scary at first.

First step

I reckon the first step to successful investing is figuring out your objectives and risk tolerance. You need to define your goals and objectives before you are able to make good decisions on which investments to choose. What you’re investing for, the risks you’re willing to take and your investment horizon can all affect how much you’ll need and which options you should pick.

If you’re just starting out, you’ll probably want to consider investment trusts first. Shares in such trusts are traded just like other shares. But as a fund, investment trusts offer the advantages of being run by a professional fund manager and diversification from buying into a well-balanced portfolio of investments.

Growth and income

If you’re looking for a combination of growth and income, then the Lowland Investment Company (LSE: LWI) might be a great first pick.

This fund invests in a broad spread of predominantly UK companies, with the aim of giving shareholders a higher than average return with growth of both capital and income over the medium-to-long term.

With 121 holdings as at 31 December, the fund invests in a diversified portfolio of companies of differing sizes. Normally, not more than half of its portfolio by value is made up of the largest 100 UK companies, with the balance invested in small- and medium-sized firms.

Outperformance

The fund has a strong track record of outperforming the benchmark FTSE All-Share Index. For the five years to the end of December, the net asset value (NAV) of the trust increased by 79%, easily beating the performance of the FTSE All-Share index, which generated a return of 63% over the same period.

At the time of writing, shares in the trust offer investors an attractive dividend yield of 3.5% and it trades at a slight discount to its net asset value of 6%.

Global diversification

Investors seeking geographical diversification may instead consider the Murray International Trust (LSE: MYI)

Launched in 1907, this fund has invested in a well-balanced portfolio of UK and international shares, with the aim of delivering both growth and income to shareholders. Its investment approach is to seek undervalued, but quality, companies that have a solid business focus, sound management, a strong balance sheet and a good corporate governance record.

Fixed income investments

Equities dominate its portfolio, with an 83% weighting, but the trust also owns a number of fixed income investments, which account for a further 16% of its portfolio. This gives the Murray International Trust even more diversification than some simple equity funds, since the price of bonds generally do not move in tandem with the stock market.

The fund’s top five equity holdings are: Taiwan Semiconductor Manufacturing (4.8%), Quimica Y Minera (4.3%), Groupo Asur (4.2%), British American Tobacco (3.8%) and Unilever Indonesia (3.4%).

This fund could also appeal to income seekers, as shares in the trust currently offer a yield of 4.2%.

The post Looking for your first investment? Consider these growth and income trusts appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2 top-performing investment trusts that could make you a millionaire

Peter Stephens — Sun, 17 Sep 2017 07:03:42 +0000

The outlook for the global economy is rather uncertain at the present time. In the US, there is political risk as a requirement to increase the debt ceiling expires at the end of the month. In Europe, Brexit is causing considerable uncertainty, while a potential end to QE in the eurozone may cause economic challenges over the medium term. And while China is growing quickly, its transition to a consumer-focused economy is unlikely to be completely frictionless.

Still, a number of similar problems have faced the global economy in recent years. Yet share prices in the UK and across the world have risen significantly. Looking ahead, a continuation of the Bull Run of recent years could be on the cards. As such, buying these two top-performing investment trusts could be a shrewd move.

Global appeal

Investing globally has served the Scottish Mortgage Investment Trust (LSE: SMT) well in the last five years. It has delivered a total return of 217%, while its benchmark has risen by 99%. Outperformance has been present in each of the last five years, which shows that the company’s management team has a strong track record of consistently high performance.

One major reason for the outperformance has been the company’s focus on the US. It has 47% of its holdings in US-listed companies, and with the S&P 500 having moved 70% higher during the period, it has provided a sizeable tailwind.

Looking ahead, more gains could be due for the S&P 500. Donald Trump is still aiming to put in place significant increases in spending as well as lower taxes during his time in office. This could create further stimulus for the economy and lead to higher profitability for companies operating in the country. Although the Scottish Mortgage Investment Trust trades at a small premium to its net asset value of 0.65%, it could prove to be a sound buy for the long term.

UK focus

Of course, the UK stock market has also performed relatively well in the last five years. The FTSE 100 is up by 22% during the period, with it benefitting from a weak pound in the last year. This has helped UK-focused companies such as the Lowland Investment Company (LSE: LWI) to post strong returns. It has recorded a total return of 75% during the last five years, which is well ahead of the main index.

The trust’s future appears to be bright. The pound could weaken yet further if uncertainty surrounding Brexit continues to build. Certainly, there is scope for an interest rate rise in the near term. But even so, a loose monetary policy looks set to stay as the Bank of England remains concerned about the potential for economic growth.

This could provide investment opportunities across a range of stocks and could mean that the Lowland Investment Company continues to perform well. Trading on a discount of 8% to its net asset value, now could be the right time to buy it.

The post 2 top-performing investment trusts that could make you a millionaire appeared first on The Twelfth Magpie.