Incredibly, a total of 30 investment trusts would have made me more than £1m if I had invested my full annual ISA allowance in the same trust each year, according to data from the Association of Investment Companies (AIC).

This assumes I invested my full ISA allowance on 6 April every year since ISAs were launched in 1999. In total I would have paid in £263,440 across 23 tax years.

I’m a fan of investment trusts

HgCapital Trust, which invests primarily in software and services businesses, would have turned my ISA contributions into a staggering £2,062,931 since 1999. I don’t know much about that particular fund but I’ve kept close tabs on the second and fifth-best-performing investment trusts.

Scottish Mortgage Investment Trust (LSE: SMT) and Polar Capital Technology Trust (LSE: PCT) have amazing track records. They would have transformed £263,440 into an incredible £2,046,762 and £1,555,681 respectively since 1999, AIC figures show.

Both funds built their success on the all-conquering technology sector, and I really wish I’d bought at least one of them. But I didn’t, and I wouldn’t today. Investment trends go in cycles and I suspect the tech sector that’s important to them will now struggle to repeat its fabulous success.

Scottish Mortgage, managed by Baillie Gifford, now has £13.9bn worth of assets under management. That’s a tribute to its blistering performance. At one point, it had returned a staggering 500% in five years. Yet nothing lasts forever and the king of investment trusts has fallen more than a third in the last six months.

Near-zero interest rates and loose monetary fiscal policy drove the tech boom. Investors piled into companies like Apple and Amazon even as their valuations soared, assuming they would continue to grow and deliver even bigger profits in future.

That era is drawing to a close as central bankers prepare to hike rates and taper bond purchases. Inflation is rocketing, and that will erode the real terms value of future tech company earnings. This makes today’s sky-high valuations harder to justify. That’s putting me off these two investment trusts.

I’ve got enough US tech, thank you

Scottish Mortgage has massive holdings in US tech giants Amazon, Nvidia and Tesla, and Chinese behemoths Alibaba Group and Tencent Holdings. Polar Capital is a rollcall of US tech titans. Apple, Amazon, Google owner Alphabet and Facebook owner Meta make up the top four holdings. There’s a fair bit of crossover between these two investment trusts.

I still retain exposure to US tech, through an S&P 500 tracker fund, so there’s another reason for me to shun these two tech-heavy investment trusts.

US tech giants do look slightly better value after the recent sell-off, but I’m still not tempted. I’m always wary of jumping into once fashionable sectors, for fear of jumping on the bandwagon too late.

Once the glory days are gone they rarely return. But as I said, I’m a fan of investment trusts and I’ll still buy shares in some. Now though, I’m looking for those targeting FTSE 100 value stocks instead.

The post These 2 investment trusts could have made me a millionaire. Why won’t I buy them now? appeared first on The Twelfth Magpie.

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Harvey Jones doesn't hold any of the shares mentioned in this article. 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 has recommended Amazon, Apple, and Tesla. 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.

Ice cool

The two investments I’m looking at here are somewhat different to a cash ISA. They spread your money across a range of UK and global stocks in the red hot technology sector, making them high-risk, high-return vehicles.

The first, Polar Capital Technology Trust (LSE: PCT) invests in a portfolio of global technology companies and is big enough to be quoted on the FTSE 250 index. It was launched in December 1996, just as the dotcom boom was picking up speed, and survived the bust in 2000.

Capital idea

Today it announced its results for the six months to 31 October which showed an 8.5% rise in total net to £1.68bn, with the share price up 7% in the period, adjusted for sterling. The weak pound worked in its favour here because in local currency terms it was down 0.7%, although it still beat the FTSE World index over this turbulent period, which fell 3%.

However, Polar Capital Technology Trust has a good long-term track record and will suit those who still believe in the big US and Chinese tech giants, as its top 10 holdings include Google-owner Alphabet, Apple, Microsoft, Facebook, Alibaba and Tencent, a roll call of the big names in technology. The fund has grown a whopping 149% over five years, against 5% for the FTSE 100. My worry is that the US tech surge could be drawing to a close, and the trust is down 11% in the last six months. Nothing lasts forever.

I am therefore wary despite a low annual charge of 1% and discount of 6.45%. There is no dividend. This could be a case of right fund, wrong time. Unless I’m wrong and the technology bull run has further to go.

British tech

Herald Investment Trust (LSE: HRI) invests in quoted small and mid-cap technology, communications and media companies and has a great track record since launch in 1994, turning an initial £1,000 investment into £14,000.

With so many technology funds focusing on the US it is a novelty to see this one has 52% exposure to the UK, with only 24% in the States plus a smattering in Asia-Pacific and international equities. It has an annual charge of 1% but again, no dividend.

Hark the Herald IT

Herald has underperformed US tech-focused trusts as a result, although a return of 62% over five years looks good against just 27% on the FTSE All Share. Its top holdings are less familiar than Polar’s, with names such as GB Group, Diploma and Craneware, although you may know Boingo Wireless, IQE and M&C Saatchi.

The trust has total assets of £927m and currently trades at a massive discount of 19% to net asset value, which suggests to me investors are wary of this sector at the moment. This trust is at the riskier end and you also have to factor in Brexit, I suppose. It could do well if the UK bounces back next year, though.

The post Forget a cash ISA! I reckon these 2 investment trusts will work your money much harder appeared first on The Twelfth Magpie.

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• Britons need a £691,000 pension to retire comfortably. Could FTSE 100 shares be the answer?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

Harvey Jones does not hold shares in these two investment trusts. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft 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, Apple, and Facebook. The Motley Fool UK owns shares of Microsoft and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. 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.

Unfortunately for growth investors, nothing on the same scale has happened for investment trusts seeking to deliver long-term capital growth. There are fewer funds for growth-focused investor to pick from… but I believe I’ve found two exciting ones.

China’s growth story

Fidelity China Special Situations (LSE: FCSS) is a fund which seeks to offer direct exposure to China’s growth story. But instead of just investing in a broad market index tracker, this fund uses an actively-managed strategy in an attempt to beat the market.

Fund manager Dave Nicholls reckons there may be better investment opportunities from buying companies which are set to benefit from China’s structural shift away from a reliance on investment towards consumption. This is because, going forward, many analysts reckon China’s middle class will be the main driver of economic growth, benefiting companies which directly deal with consumers.

As such, the fund has an outsized exposure to the consumer discretionary sector, with a weight of 31.5%, compared to the benchmark MSCI China Index’s weight of just 9.5%. Technology stocks also dominate the fund (as it also does for the benchmark), with its two biggest positions being Tencent (14.7%) and Alibaba (13.7%).

On the downside, unbalanced, actively-managed investment trusts can have their disadvantages too. Firstly, there’s no guarantee that a specific sector will continually outperform the market, leading to occasional bouts of underperformance against the market index. Additionally, excessive focus on some sectors could reduce diversification benefits, potentially leading to higher portfolio volatility and risk.

Technology stocks

For investors looking to increase their exposure to technology stocks, the Polar Capital Technology Trust (LSE: PCT) may be of greater interest. The fund aims to maximise capital growth for shareholders through investing in a diversified portfolio of technology companies around the world.

Despite the recent sell-off in tech stocks over the past week, I reckon the technology sector holds plenty of promise for investors. Reflecting the impact of technology disruption on traditional industries, technology stocks have the potential to generate significantly faster earnings growth than the broader market.

Large-caps

Large-caps, companies with a market capitalisation of more than $10bn, dominate the fund’s top holdings, accounting for just over 75% of its portfolio. The fund is geographically diversified, although because of the sheer disparity in the number of large technology companies in the US compared to the rest of the world, the fund is heavily exposed to the North American market. US & Canada stocks account for 66.8% of its portfolio’s value, with 10 out of its top 15 holdings coming from there.

Its top five holdings are Apple (7.5%), Alphabet (7.4%), Mircosoft (6.2%), Facebook (6.2%) and Samsung Electronics (3.8%).

The post Looking to invest for growth? Check out these top-performing investment trusts appeared first on The Twelfth Magpie.

More reading

• 3 possible ways to get a Stocks and Shares ISA into the new space age
• Britons need a £691,000 pension to retire comfortably. Could FTSE 100 shares be the answer?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

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.

Templeton Emerging Markets Investment Trust

The emerging markets offer exciting investment opportunities for long-term investors, in my opinion. Many emerging countries such as China, India and Taiwan are growing considerably faster than most developed countries, and as a result, over the long term, this growth should translate into powerful investment returns.

After a few poor years of returns between 2013-15, the sector appears to be on the up again, with the MSCI Emerging Markets USD Index returning 11% last year, and 28% this year up to the end of August. Investment trusts such as the Templeton Emerging Markets Investment Trust (LSE: TEM) are an effective way of gaining exposure to the asset class. 

Established in 1989, this trust’s objective is to provide long-term capital appreciation by investing in companies listed in emerging markets or that are listed in developed countries yet have significant operations in emerging markets. The trust’s NAV increased 125% for the 10-year period to the end of August. Ongoing charges are 1.12%.

Portfolio manager Carlos Hardenberg is particularly bullish about IT stocks in countries such as Taiwan and South Korea at present, stating that many of the companies that develop sensors and cameras for self-driving cars are based in these regions, and trading at attractive valuations.

At the end of August, the portfolio had the largest exposure to Hong Kong/China, South Korea and Taiwan, with the three top sectors being IT, financials and consumer discretionary. The top 10 holdings at the end of the month were:

Source: temit.co.uk

Emerging markets can be volatile, and therefore are most likely not suitable for risk-averse investors. However, for risk-tolerant investors, the Templeton Emerging Markets Investment trust could be a good way of gaining exposure to the asset class.

Polar Capital Technology Trust

Another trust with strong growth potential, in my opinion, is the Polar Capital Technology Trust (LSE: PCT). This one aims to generate long-term capital growth by investing in a diversified portfolio of technology companies across the world.

Technology is changing the world at a rapid rate right now, led by innovative companies such as Apple, Google and Amazon.com, and the Polar Capital Technology Trust looks to be an excellent vehicle for gaining exposure to such companies. The trust’s NAV has increased 173% in the last five years alone.

At the end of August, its top 10 holdings were:

Source: polarcapitaltechnologytrust.co.uk

With ongoing charges of a reasonable 1.16%, this trust looks to be an excellent way for UK investors to gain exposure to some of the world’s best technology companies.

The post 2 high-growth investment trusts I’d buy to supercharge my pension appeared first on The Twelfth Magpie.

More reading

• 3 possible ways to get a Stocks and Shares ISA into the new space age
• Britons need a £691,000 pension to retire comfortably. Could FTSE 100 shares be the answer?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

Edward Sheldon 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.

The German firm’s shares trade hands at an attractive 13.6 times forward earnings, despite seven straight years of sales growth and management nearly doubling earnings over the last four years to €0.47 per share by 2016.

The key has been steadily increasing demand for the company’s quality assurance testing, alongside accelerating growth from its consulting arm. Looking ahead, the future appears bright for overall global demand for SQS’s services as more and more software is designed to operate everything from cars to household appliances and industrial machinery.

On top of sales growth, the company’s management team is also focusing on margin improvements by shifting focus to higher-margin consulting work. In the short term this is causing some jittery nerves among investors as it involves managing the steady decline in sales from low margin, short-term contracts in its professional services division that still accounts for 29% of sales.

However over the long term, this shift should be encouraged as it fits into management’s plan to increase EBIT margins to 9%. Good progress is already being made toward this target with H1 2017 EBIT margins rising from 6.9% to 7.5% year-on-year. As SQS expands its offering and solidifies its market-leading position, there is considerable room to improve margins, cash flow and sales through cross-selling higher margin consulting work.

Together with overall market growth, a growing 2.4% dividend yield and a very reasonable valuation, I reckon SQS is worth a closer look from growth-hungry investors this month.

A safer way to cash in on tech stocks?

If you’re looking for exposure to the tech industry but prefer a more diversified approach, you may be keen on Polar Capital Technology Trust (LSE: PCT). At the end of June, the fund owned the shares of 121 global tech firms with the top 15 accounting for roughly half of the portfolio’s value.

As is common with investment trusts, the fund trades at a slight 2.2% discount to its net asset value (NAV). This reflects ongoing annual management fees of 1% on assets up to £800m and performance charges of 15% when returns exceed that of the benchmark Dow Jones World Technology Index.

For investors who aren’t put off by paying these ongoing fees, the fund does offer an easy way to hold a basket of predominately foreign tech shares as UK stocks account for only 1.4% of the portfolio. Unsurprisingly, North American stocks are the most represented with Alphabet, Apple, Microsoft and Facebook alone accounting for 25.6% of the fund’s assets.

The post Two bargain basement growth stocks to consider in July appeared first on The Twelfth Magpie.

More reading

• 3 possible ways to get a Stocks and Shares ISA into the new space age
• Britons need a £691,000 pension to retire comfortably. Could FTSE 100 shares be the answer?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Apple, and Facebook. 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.