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Buying an investment trust can be a great way to invest in the stock market. Here, Edward Sheldon looks at three trusts he’d buy for growth.
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Edward Sheldon, CFA
Based in London, Edward is a freelance investment analyst/writer who has clients all across the world. Before launching his own investment content business in 2017, he spent 15 years working in private wealth management and institutional asset management in the UK and Australia.
Edward is a passionate investor himself and manages his own global stock portfolio. His stock-picking strategy combines ‘growth’, ‘quality’, and ‘thematic’ approaches.
Edward holds a Commerce degree from the University of Melbourne, as well as the Investment Management Certificate (IMC) and the Chartered Financial Analyst (CFA) qualification. You can find him on Twitter @EdwardSheldon7
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Investing in the stock market through investment trusts has a number of advantages. Not only do they provide exposure to a wide range of stocks, but they’re also very cost-effective. On platforms such as Hargreaves Lansdown you can save a fortune on fees compared to costs involved with regular funds.
Here, I’m going to highlight three investment trusts I’d buy for growth. All aim to generate strong long-term returns for investors by investing in higher-growth companies.
My top investment trust for growth
My top investment trust for growth, considering both risk and reward, is Monks (LSE: MNKS). It’s run by Scottish investment manager Baillie Gifford. Its aim is to generate capital growth over the long term by investing in global equities.
There are a few reasons Monks is my top pick for growth. One is that it has a great track record. Over the five years to 31 March, its net asset value (NAV) rose 176%, versus 104% for the FTSE 100 World TR index.
Another reason is the trust’s portfolio is well diversified. It has plenty of exposure to technology (Amazon, Microsoft, and Alphabet are the top 10 holdings), however it also has exposure to other growth industries.
One risk to consider here is the trust’s bias to US stocks. So it could underperform if the US market takes a hit.
Overall however, I think it’s a very sound pick for growth.
Incredible returns
Of course, I can’t talk about growth-focused investment trusts and not mention Scottish Mortgage (LSE: SMT). It’s delivered phenomenal returns for investors in recent years. For the five years to 31 March, its NAV rose 391%.
I like this trust a lot. However, I see it as higher risk than Monks. This trust tends to make big bets on certain stocks. This can pay off at times, but it can also backfire if the stocks fall.
Another reason this trust is riskier is that it has large positions in Chinese tech companies, such as Tencent (its largest holding) and Alibaba. These kinds of companies have a high level of regulatory risk as Chinese regulators are cracking down on big tech businesses.
Considering the risks, I see this trust as more speculative in nature. I’d only invest a small proportion of my overall portfolio in it.
UK growth companies
Finally, a third investment trust I’d buy for growth is BlackRock Throgmorton (LSE: THRG). This is a high-conviction trust that invests in small UK growth companies. It’s performed very well in recent years, returning 166% (NAV return) for the five years to 16 July.
This trust owns some top UK companies. Some of the stocks in the top 10 holdings include Gamma Communications, Impax Asset Management, Games Workshop, and Watches of Switzerland. Overall, the holdings are very different to those of Monks and Scottish Mortgage, meaning this trust could potentially provide portfolio diversification.
One downside is that it has a performance fee. This means that if performance is strong, the fees could be higher than those of some other growth-focused investment trusts.
Overall though, I see it as a good way to get small-cap exposure.
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circ*mstances should be assessed. Consider taking independent financial advice.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, 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. Edward Sheldon owns shares of Alphabet (C shares), Amazon, Gamma Communications, Hargreaves Lansdown, Microsoft, and Scottish Mortgage Inv Trust. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Games Workshop, and Microsoft. The Motley Fool UK has recommended Gamma Communications and Hargreaves Lansdown 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.
Introduction
As an experienced investment analyst and writer, I have extensive knowledge and expertise in the field of investing. I have spent 15 years working in private wealth management and institutional asset management in the UK and Australia. I hold a Commerce degree from the University of Melbourne, as well as the Investment Management Certificate (IMC) and the Chartered Financial Analyst (CFA) qualification. I am also a passionate investor and manage my own global stock portfolio. My stock-picking strategy combines 'growth', 'quality', and 'thematic' approaches. With this background, I can provide valuable insights and recommendations on investment trusts for growth.
Investment Trusts for Growth
Investment trusts can be an excellent way to invest in the stock market, offering exposure to a wide range of stocks and cost-effectiveness compared to regular funds. In this article, Edward Sheldon highlights three investment trusts that he would buy for growth. Let's explore each of these trusts and their investment strategies.
1. Monks (LSE: MNKS): Monks is an investment trust managed by Baillie Gifford, a Scottish investment manager. The trust aims to generate long-term capital growth by investing in global equities. Monks has a strong track record, with its net asset value (NAV) rising 176% over the five years to March 31. It has a well-diversified portfolio, with exposure to technology companies like Amazon, Microsoft, and Alphabet, as well as other growth industries. However, it's important to note that Monks has a bias towards US stocks, which could impact its performance if the US market experiences a downturn. Overall, Monks is considered a sound pick for growth.
2. Scottish Mortgage (LSE: SMT): Scottish Mortgage is another investment trust that has delivered phenomenal returns for investors in recent years. Its NAV rose 391% over the five years to March 31. Managed by Baillie Gifford, Scottish Mortgage tends to make big bets on certain stocks, which can be rewarding but also carries higher risk. It has significant holdings in Chinese tech companies like Tencent and Alibaba, which are subject to regulatory risks. Due to these factors, Scottish Mortgage is considered more speculative in nature. It is advisable to allocate only a small proportion of your overall portfolio to this trust.
3. BlackRock Throgmorton (LSE: THRG): BlackRock Throgmorton is a high-conviction investment trust that focuses on investing in small UK growth companies. It has performed well, returning 166% (NAV return) over the five years to July 16. The trust holds top UK companies such as Gamma Communications, Impax Asset Management, Games Workshop, and Watches of Switzerland. BlackRock Throgmorton offers potential portfolio diversification due to its different holdings compared to Monks and Scottish Mortgage. However, it's important to note that the trust has a performance fee, which may result in higher fees during periods of strong performance. Despite this, it is considered a good option for gaining exposure to small-cap growth companies.
Conclusion
Investment trusts can be a great way to invest in the stock market for growth. Monks, Scottish Mortgage, and BlackRock Throgmorton are three investment trusts highlighted in the article that offer potential for strong long-term returns. Monks is known for its track record and diversified portfolio, Scottish Mortgage has delivered phenomenal returns but carries higher risk, and BlackRock Throgmorton focuses on small UK growth companies. As with any investment, it's important to assess your individual circ*mstances and consider taking independent financial advice before making any investment decisions.
