3 investment trusts I’d buy for growth

Buying an investment trust can be a great way to invest in the stock market. Here, Edward Sheldon looks at three trusts he’d buy for growth.

| 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.

Investing in the stock market through investment trusts has a number of advantages. Not only do they provide exposure to a wide range of stocks, but they’re also very cost-effective. On platforms such as Hargreaves Lansdown you can save a fortune on fees compared to costs involved with regular funds.

Here, I’m going to highlight three investment trusts I’d buy for growth. All aim to generate strong long-term returns for investors by investing in higher-growth companies.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

My top investment trust for growth

My top investment trust for growth, considering both risk and reward, is Monks (LSE: MNKS). It’s run by Scottish investment manager Baillie Gifford. Its aim is to generate capital growth over the long term by investing in global equities.

There are a few reasons Monks is my top pick for growth. One is that it has a great track record. Over the five years to 31 March, its net asset value (NAV) rose 176%, versus 104% for the FTSE 100 World TR index.

Another reason is the trust’s portfolio is well diversified. It has plenty of exposure to technology (Amazon, Microsoft, and Alphabet are the top 10 holdings), however it also has exposure to other growth industries.

One risk to consider here is the trust’s bias to US stocks. So it could underperform if the US market takes a hit.

Overall however, I think it’s a very sound pick for growth.

Incredible returns

Of course, I can’t talk about growth-focused investment trusts and not mention Scottish Mortgage (LSE: SMT). It’s delivered phenomenal returns for investors in recent years. For the five years to 31 March, its NAV rose 391%.

I like this trust a lot. However, I see it as higher risk than Monks. This trust tends to make big bets on certain stocks. This can pay off at times, but it can also backfire if the stocks fall.

Another reason this trust is riskier is that it has large positions in Chinese tech companies, such as Tencent (its largest holding) and Alibaba. These kinds of companies have a high level of regulatory risk as Chinese regulators are cracking down on big tech businesses.

Considering the risks, I see this trust as more speculative in nature. I’d only invest a small proportion of my overall portfolio in it.  

UK growth companies

Finally, a third investment trust I’d buy for growth is BlackRock Throgmorton (LSE: THRG). This is a high-conviction trust that invests in small UK growth companies. It’s performed very well in recent years, returning 166% (NAV return) for the five years to 16 July.

This trust owns some top UK companies. Some of the stocks in the top 10 holdings include Gamma Communications, Impax Asset Management, Games Workshop, and Watches of Switzerland. Overall, the holdings are very different to those of Monks and Scottish Mortgage, meaning this trust could potentially provide portfolio diversification.

One downside is that it has a performance fee. This means that if performance is strong, the fees could be higher than those of some other growth-focused investment trusts.

Overall though, I see it as a good way to get small-cap exposure.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Alphabet (C shares), Amazon, Gamma Communications, Hargreaves Lansdown, Microsoft, and Scottish Mortgage Inv Trust. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Games Workshop, and Microsoft. The Motley Fool UK has recommended Gamma Communications and Hargreaves Lansdown and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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

Tired woman sleeping on London underground
Investing Articles

5 steps to monthly passive income streams of £500

Aiming for regular passive income streams, our writer walks through five key steps he would take.

Read more »

Business people shaking hands
Investing Articles

Director dealings: HSBC, National Grid, Taylor Wimpey

Director dealings can indicate whether a company's doing well. So, here are this week's director dealings from three of the…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 lesser-known stocks with 10% dividend yields!

With sky-high inflation, sizeable dividend yields can help my portfolio grow. These two stocks are paying 10% on average.

Read more »

Businessman pulling out wooden brick from toppling stack
Investing Articles

Is the Woodbois share price a bargain – or a value trap?

The Woodbois share price has seen big swings recently. Our writer considers why and explains his response.

Read more »

Electric cars charging in station
Investing Articles

Here’s why NIO stock is my top EV pick!

NIO stock had been one of the worst-performing shares over the last year, but it appears to have bottomed out.…

Read more »

Risk reward ratio / risk management concept
Investing Articles

The JD Wetherspoon share price has fallen 45% — should I load up?

The JD Wetherspoon share price has shed almost half its value in the past year. Should our writer buy another…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Down 50%, is the Scottish Mortgage share price a bargain in plain sight?

The Scottish Mortgage share price has lost half its value in recent months. Is it now a bargain for our…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A cheap UK share for the cybersecurity boom!

I'm backing this UK share after its share price collapsed this week. In fact, I've recently added this cybersecurity stock…

Read more »