Investing in your 50s is all about balance. On the one hand, you still want your investments to grow at a healthy rate above inflation over the long term, as you could potentially live for another 30 to 40 years. On the other hand, you don’t want to take on too much risk, as retirement is not far off and capital preservation is therefore important.
Today, I’m looking at two investment trusts that I believe could be ideal for investors in their 50s. Both trusts have a strong focus on FTSE 100 dividend stocks and therefore offer the potential for capital growth and income, but are also managed quite conservatively, meaning they are lower risk.
City of London Investment Trust
The City of London Investment Trust (LSE: CTY) could have a lot to offer investors in their 50s, in my opinion.
For starters, portfolio manager Job Curtis – who has managed the trust for nearly 30 years now – takes a cautious approach to investing, generally focusing on well-established, dividend-paying companies (top holdings in the portfolio at the end of 2018 included Shell, HSBC, BP, Diageo, and Unilever) and never taking unnecessary risks. This style of investing is well suited to older investors as it can offer downside protection when markets are falling. A look at recent performance shows that the trust outperformed its benchmark in the second half of 2018 when global equity markets declined.
Furthermore, the trust offers a nice yield of around 4.5% at present, meaning investors can pick up a healthy level of income from the investment, and it also has a fantastic dividend growth track record, having increased its payout every year for over 50 years now, which is an excellent achievement.
With fees of just 0.41% per year, I see CTY as an excellent core holding for investors in their 50s.
Merchants Investment Trust
Another investment trust that I believe is well suited to investors in their 50s is the Merchants Investment Trust (LSE: MRCH). This mainly invests in large, well-known FTSE 100 companies with the aim of providing investors with a high level of income, plus income growth and some long-term capital growth. Its top holdings at the end of 2018 were Shell, GlaxoSmithKline, HSBC, Imperial Brands, and BP.
What I like about MRCH is that the portfolio manager Simon Gergel is extremely focused on dividends. That makes it a good choice for older investors who aren’t far off retiring, as dividends could potentially be used for income in retirement. The trust currently offers a high yield of around 5.4%, meaning that a £10,000 investment could generate dividends of £540 per year (not guaranteed of course). And like CTY, it also has a good dividend growth track record, having increased its payout for 36 consecutive years now.
With ongoing charges of a reasonable 0.59% per year, I think Merchants Investment Trust could definitely be worth considering if you’re in your 50s and looking for lower-risk investments.
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Edward Sheldon owns shares in City of London Investment Trust, Royal Dutch Shell, Imperial Brands, GlaxoSmithKline, Unilever and Diageo. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Diageo, HSBC Holdings, and Imperial Brands. 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.