2 growth and income investment trusts I’d buy to retire on

These two investment trusts have great long-term potential.

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When it comes to UK-focused investment trusts that offer both growth and income, Jupiter UK Growth Investment Trust (LSE: JUKG) initially looks to be an attractive investment. Over the past five years, the managers of this firm have presided over a return of 65% excluding dividends. 

At the time of writing the trust offers a dividend yield of 2.1% and trades at a 3% discount to net asset value. 

Outperforming the market 

Returns for the year ended June 30 showcase Jupiter’s potential. For the year, the firm’s net asset value per share rose by 26% to 334p from 265.4p the year before. This beat its benchmark, the FTSE All-Share Index, which reported a total return of 18%. According to Jupiter’s press release on the matter, its manager’s stock-picking and asset allocation skills were “shown to good effect,” during the year and the portfolio benefitted from a “strategic lack of exposure” to the oil and gas sector.

I believe that Jupiter is a great way to play the success of the UK economy. The fund has more than 20% of assets devoted to its top four holdings, Legal and General, Lloyds, Barclays and Sirius Minerals, all of which are UK market champions with bright outlooks. Other companies featured in the top 10 holdings are Taylor Wimpey and Thomas Cook, both of which offer growth and income. 

However, despite Jupiter’s attractive qualities, the one drawback that I see is the trust’s fee schedule. Annual charges are 1.2% and the managers command a performance fee of 15% on profits. Few other investment trusts charge such a hefty performance fee. Still, for exposure to some of the UK’s fastest growing large-caps, Jupiter looks to me to be an attractive buy. 

Income and growth 

Murray Income Trust (LSE: MUT) does not charge a performance fee, and the trust’s annual operating expenses are only 0.7%, a little more than half of those charged by Jupiter. 

As its name suggests, Murray is income-focused. The trust currently supports a dividend yield of 4.2% and trades at a discount to net asset value of 8.5%. The portfolio is built with income in mind. The top holdings are Unilever, GlaxoSmithKline and British American Tobacco with other FTSE 100 income champions making up the rest of the portfolio. 

As a diversified income play, Murray ticks all the boxes. The trust has low fees, a well-diversified portfolio and a dividend yield that’s above the FTSE 100 average of around 3.8%. What’s more, there’s scope for capital growth within the portfolio. Growth stocks such as British American Tobacco and Unilever have outperformed the FTSE 100 over the past five years (by 14.5% and 62.5% respectively), and I believe that this trend is set to continue meaning that there’s the prospect of both capital growth and income from Murray. 

So, if you’re looking for an income fund that also has the potential for capital growth to add to your retirement portfolio, Murray deserves your attention. 

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.

Rupert Hargreaves owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Barclays 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.

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