The Motley Fool

No savings at 60? I’d buy these 2 investment trusts to generate passive income

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.

Senior Couple Walking With Pet Bulldog In Countryside
Image source: Getty Images.

Putting savings into investment trusts addresses many of the fundamental questions investors ask themselves, namely how do I own a large number of companies and how do I generate more income year-on-year? I think owning shares in a high-yielding investment trust can help generate a passive income. It could make a big difference to how you retire, especially if you have no savings.

Investing in the UK’s biggest and best

Merchants Trust (LSE: MRCH) aims to provide an above-average level of income, plus income growth and long-term growth of capital by investing mainly in higher-yielding large UK companies. The portfolio holds a host of high-profile companies such as Royal Dutch Shell, GlaxoSmithKline and Barclays. About two-thirds of the trust is invested in the FTSE 100 with a further 25% in the FTSE 250. The rest is divided between small-caps and cash.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

The dividend is paid quarterly, which is good if you want to create a passive income ahead of retirement. It means you can invest in more shares or take the cash as income, although the former will help you build a shares portfolio far more quickly, especially if you have no savings. The yield has been pushed down by recent strong share price growth, but still provides over 4%, which is more or less in line with the FTSE 100.

A slow and steady, year-on-year increase in the dividend gives me confidence that it’s ideally placed to generate a passive income to help you retire richer.

That, alongside the ability of investment trusts to hold reserves to see investors through any leaner years, makes them potentially very financially rewarding and probably the cornerstone of a good investment portfolio. This is why I also like the look of this second investment trust. 

Another above-average yielder

Dunedin Income Growth Investment Trust (LSE: DIG) is another one that is yielding over 4%. It also holds a number of the same higher-yielding companies as Merchants Trust, but it has different top holdings, such as Assura, RELX and Diageo

Besides the yield, one of the big perks of this investment trust is that it trades at a discount to what it’s actually worth. Good for investors who want to buy up the shares. The discount is 7%, which is only a little less than the 12-month historical average discount that has been nearer 8%. Again, a rise in the share price following the market bounce post-election has contributed to the narrowing of the discount.

Cumulatively over the three years to 30 November 2019, the shares rose by a third and the dividend has been rising year-on-year and is paid quarterly.

Overall I think these investment trusts are ideal for someone approaching the end of their working life who wants to retire better off. They provide diversified access to a large number of larger companies and a generous dividend yield that is often more than the average for the FTSE 100. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Andy Ross owns shares in Merchants Trust. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.