2 fast-rising investment trusts that could make you a millionaire

These two investment trusts seem to offer further capital growth potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The FTSE 100 has performed relatively well in the last five years. It has risen by 28% and, when dividends are included, this figure is close to 50%. However, some investment trusts have been able to better this return during the same time period. In some cases, though, they continue to trade at a discount to their net asset value (NAV). As such, they could still offer good value for money, as well as high growth potential in the long run. Here are two such trusts which could be worth buying right now.

Impressive performance

Rising by 128% in the last five years is the Mercantile Investment Trust (LSE: MRC). It focuses on mid and small-cap UK stocks, and they could help it to deliver impressive returns in future. One reason for this is the uncertainty surrounding the UK economy. With Brexit causing consumer and business confidence to come under pressure following a spike in inflation, many investors are focusing to a greater extent on larger, more internationally-exposed companies. This could mean their smaller peers offer wider margins of safety at the present time.

The company’s performance puts it in the top quartile of its sector over the last three years. Despite its strong performance, it continues to trade at a 10% discount to its NAV. This suggests there could be even greater capital growth potential on offer. It also has a dividend yield of 2.3%, which is only 30 basis points lower than inflation at the present time. The trust aims to keep dividend growth as close to inflation as possible in the long run, which could make it of interest to income investors.

However, the main focus of the Mercantile Investment Trust is capital growth. Holdings such as Bellway, Auto Trader and Just Eat mean that it has the potential to deliver further outperformance of the FTSE 100 in the next five years.

Value focus

Also offering upside potential in the long run is the Jupiter UK Growth Investment Trust (LSE: JUKG). It has delivered a total return of 69% during the last five years. This puts it well ahead of the FTSE 100’s performance during the same time period. Despite this, it trades at a 3% discount to its NAV and this indicates it could offer further upside over the medium term.

The trust has a number of value opportunities within its major holdings. For example, its top 10 holdings include companies such as Lloyds and Barclays – both of which trade on relatively low price-to-earnings ratios.

Similarly, stocks such as Taylor Wimpey and IAG could deliver long-term growth because of low valuations which have been brought about by uncertain market conditions. And with a number of smaller companies included within its holdings, the trust has exposure to potentially fast-growing areas, too. Therefore, it could deliver further outperformance of the FTSE 100 in the long run.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares in Lloyds, Barclays and Taylor Wimpey. The Motley Fool UK has recommended Auto Trader, Barclays, Just Eat, and Lloyds Banking Group. 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.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

How much passive income could a £20,000 ISA provide in a year?

A diversified portfolio of high-yield FTSE shares can build a large and reliable passive income over time, as Royston Wild…

Read more »

Three generation family are playing football together in a field. There are two boys, their father and their grandfather.
Investing Articles

See how much an investor needs in an ISA to fund an £888 monthly passive income

Harvey Jones grabs his calculator to work out how much money people need to generate a decent passive income in…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Value Shares

The BP share price is climbing – see how much £10k invested 1 month ago is worth now

It's been a tough few years for the BP share price. Harvey Jones examines whether the FTSE 100 oil giant…

Read more »

Santa Clara offices of NVIDIA
Investing Articles

Nvidia stock has soared 1,471% in 5 years. Here’s how I’m hunting for the next Nvidia!

Nvidia stock has put in a stunning performance over the past five years. This writer tries to apply some lessons…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

If someone decided to start buying shares with £10k a year ago, here’s what they could be sitting on now!

If someone had started buying shares a year ago with £10k, what might have happened? Our writer outlines some factors…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

The Rolls-Royce share price is close to an all-time record. Could it still be a bargain?

The Rolls-Royce share price has been punching out the lights of late. Our writer thinks things could get even better…

Read more »

4 Teslas in a parking lot at a charger station
Investing Articles

The Tesla share price slips further — how much would £10k invested at the start of the year be worth now?

The Tesla share price remains under pressure, with risks mounting from multiple directions. Here’s what a £10,000 investment would be…

Read more »

British pound data
Investing Articles

The Ocado share price is a sea of red! Time to cut my losses?

Every time Harvey Jones checks out the Ocado share price, he sees red. Will it ever stop falling and leaving…

Read more »