If you have just opened a brand new stocks & shares ISA, you may be wondering where to invest your capital. With financial markets on edge at present, investing feels a little daunting right now.
One option is to invest in an investment trust. These can be bought and sold through your broker just like regular stocks, yet unlike regular stocks, investment trusts give you access to a whole portfolio of companies, managed by a professional portfolio manager. The advantage is that you can increase your diversification and lower your investment risk.
Here’s a look at two growth-focused trusts that have performed exceptionally well in recent years.
JP Morgan Mid Cap Investment Trust
The JP Morgan Mid Cap Investment Trust (LSE: JMF) invests in medium-sized UK companies predominantly within the FTSE 250 index. The trust aims to achieve capital growth for investors, by putting it’s money in under-researched dynamic companies with strong growth potential and reliable income streams. The portfolio managers have the ability to use borrowing to leverage the portfolio in an attempt to generate higher returns.
An analysis of the portfolio reveals a number of stocks I’m quite bullish about. For example, Ashtead Group, JD Sports Fashion and OneSavings Bank, three stocks in the top five holdings, are all companies that I rate highly for their growth prospects.
The performance of this trust over the last five years has been outstanding, with the share price returning 144% to the end of February. In contrast, the FTSE 250 index returned 64%. With an ongoing charge of just 0.86%, I believe this trust is a fantastic choice for growth investors with slightly higher risk tolerances. It currently trades with a 3% discount to its net asset value (NAV).
Schroder UK Mid Cap Fund
Another growth-focused investment trust that I rate highly is the Schroder UK Mid Cap Fund (LSE: SCP). This trust also invests in mid-cap equities with the aim of generating a total return in excess of the FTSE 250 (ex-Investment Companies) index.
Over the last five years to the end of February, the trust has easily achieved that objective, with the share price returning an impressive 11.6% per year vs 10.4% for the benchmark. Since inception, SCP has delivered even higher returns for investors, generating total returns of 16.7% per year. Ongoing charges are just 0.93% per year.
The portfolio manager of this trust has a unique investment process, taking a stock-specific approach with a focus on growth companies with strong management teams, good future prospects and strong business franchises. A look at the portfolio reveals some exciting growth stocks such as food and beverage concessions specialist SSP Group, veterinary pharmaceuticals group Dechra Pharmaceuticals and UK property website Rightmove.
Given that the trust currently trades on a sizeable discount of 15% to its NAV, I believe now could be good time to take a closer look.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
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Edward Sheldon owns shares in JD Sports Fashion. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Rightmove. 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.