Monks diversification

Looking at the holdings as of April 2021, it is clear the trust ran by Spencer Adair has a diversified portfolio. Top holdings included companies such as Amazon, Ryanair, and Prudential. This offsets risk, as it allows the trust to maintain a balanced position in multiple sectors. Comparing this to SMT shows the benefits this can provide, as at times this year SMT has suffered due to the tech sell-off.

The idea of diversification also applies to the sector analysis of the investment trust. With technology at the top with over 23%, further down sits health care (13.5%) and other sectors such as real estate (2.9%). Again, this shows the opportunities Monks provides through its diversification. Add to this the ongoing charges of just 0.48%, and I see plenty of potential here to access an array of sectors for a cheap price.

Another factor I really like about Monks is its investing strategy. The trust is focused on long-term capital growth, taking a priority over income. A patient approach suits my investment style, and as such I see real opportunities in this investment trust. I only must look at the 205% return over the past five years to see this in action. Of course, past performance is not an indication of future returns.

Monks risks

With all that said, there are risks to consider. First, the trust has a large weight in US stocks. As of April, this was nearly 50%. This could cause issues, because if the US market underperforms, the investment trust may also underperform.

The trust also has nearly 15% of its holdings in emerging markets, a factor that could cause problems due to ongoing Covid-19 struggles in countries such as India and Brazil. With this said, a long-term outlook should not be affected by potential short-term volatility – and as such, I do not see this as a major issue.

Why I’m buying Monks

Although the trust does come with risks, I believe the opportunities outweigh these potential problems. A long-term outlook is something I look for when investing.

I also like the diversification the trust can add to my portfolio. It offsets risk by allowing me to access a wide variety of sectors and countries. I also am a fan of its relatively large proportion of holdings in emerging markets. The pandemic has had a major impact on these countries, but I think, long-term, these markets can provide great opportunities for capital growth.

The post Why I’m buying this top investment trust for long-term growth appeared first on The Twelfth Magpie.

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Charlie Keough owns shares in Scottish Mortgage Investment Trust. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Prudential and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.

Old hands

Or maybe I am doing you a disservice and you have taken note of Monks Investment Trust (LSE: MNKS) and Scottish Mortgage Investment Trust (LSE: SMT). They have been around a long enough to grab your attention, having been launched in 1929 and 1909 respectively.

They are big enough as well, with Monks managing £1.77bn of money, while Scottish Mortgage is in charge of a handsome £7.72bn. Investment trusts are companies listed on the stock market, which can be traded easily like shares, and its size makes Scottish Mortgage a constituent of the FTSE 100. Another reason why you may just have heard of it.

American friends

And here’s another. Both have thrashed the FTSE 100 lately. Monks has returned 121% in total over the last five years, while Scottish Mortgage delivered a whopping 205%, according to Trustnet.com. By comparison, the average fund in their benchmark sector, global investment trusts, is up 93%, while the HSBC FTSE 100 Index tracker fund returned just 33%.

This does not mean they will always top the ailing FTSE 100. The two funds have hefty exposure to North American equities, almost half the portfolio in both cases, which means they have benefited from US outperformance. However, the US is starting to look expensive, and if it fell then both of these funds would suffer.

Global spread

You should certainly bear that in mind before investing in either, and also look at your existing portfolio to see how much exposure you already have to the US, and how much more you want – if any.

These are also global funds, so Monks holds around 19% in emerging market equities, 16% in Europe, 8% in Japan, 6% in the UK and 3% in Asia-Pacific. Scottish Mortgage invests 25% in the eurozone and Europe, along with 22% China exposure, plus a bit of UK and India. Again, check carefully to see how this would slot in alongside your existing holdings.

It is also worth casting an eye over the funds’ top 10 holdings: Amazon is number one in both, while Alibaba also features. You may recognise Prudential, Google owner Alphabet and Taiwan Semiconductor Manufacturing, which all feature in the Monks, while Scottish Mortgage includes Tencent Holdings and Netflix, as well as a 4.9% stake in Tesla, which may concern you given recent events.

Low cost

A key attraction of investment trusts is that they have much lower fees than more heavily marketed and popular unit trust funds. For example, Monks has an ongoing charges figure of just 0.52% a year, which falls to just 0.37% with Scottish Mortgage. The lower the charges, the more growth you keep for yourself.

These are not for income seekers, with dividend yields of just 0.17% and 0.58% respectively. At retirement you might want to switch your money into low-risk dividend paying investment trusts like the two discussed in another report. Hopefully, you will have a lot of money to switch by then.

The post Retire wealthy: 2 stunning investment trusts that are absolutely smashing the FTSE 100 appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. harveyj has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Tesla. The Motley Fool UK has recommended Prudential. 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.