2 irresistible FTSE 250 investment trusts to buy before the market recovers

Paul Summers picks out two investment trusts from the FTSE 250 (INDEXFTSE:MCX) he’d buy before markets start firing again.

| More on:
Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

I’m a big fan of investment trusts, especially some of those that feature in the FTSE 250. Not only do they allow me to tap into more specialist parts of the market, they also allow their managers to borrow money to invest more at times when they are confident of generating better returns.

Notwithstanding this, many such trusts have endured a difficult year so far. As a Fool focused on the long term, however, I see this as nothing more than an opportunity to load up.

Polar Capital Technology Trust

Performance-wise, FTSE 250-listed Polar Capital Technology Trust (LSE: PCT) was doing incredibly well prior to 2022. Not that this should come as a surprise. The emergence of trillion-dollar tech titans over the last decade was always bound to get investors salivating.

Sadly for those already invested, the year-to-date hasn’t been quite so kind. This investment trust’s share price is down almost a quarter, as I type.

Short-term blip? I think so. With literally billions of us committed to their ‘ecosystems’ I can’t imagine a scenario where the valuations of firms like Microsoft or Alphabet — two of the biggest holdings here — won’t recover. Yes, this might take a while. However, I would never think of buying shares here if my time horizon was anything less than a few years.

A word of warning

Naturally, I have no idea what will happen in the short term. Tech stocks could continue to be shunned by the market due to fears over rising interest rates. The latter tends to be bad news for companies who don’t expect to see profits for a while. Galloping inflation could also hit consumer demand for new products made by the sort of companies PCT holds.

For this reason, I’d need to look elsewhere as a way of balancing out the risk here. One option jumps out, also from the FTSE 250.

Blackrock World Mining Trust

Unlike most tech funds (including the one managed by Polar Capital), mining shares had a generally solid first six months of 2022. Investors, spooked by rising prices and the invasion of Ukraine, flocked to the likes of Rio Tinto and Anglo American. The Blackrock World Mining Trust (LSE: BRWM) also saw its share price soar.

Unfortunately, some of the gloss has now come off mining shares with several metals plummeting in value. The price of copper — often regarded as a bellwether for economic sentiment — recently hit a 20-month low.

This lack of control over the price of what they produce means the traditionally chunky dividends of mining firms can’t be guaranteed. As an indication of this, the aforementioned Rio Tinto recently halved its payout.

Safety in numbers

Still, the fact that the Blackrock investment trust spreads my money into many different companies digging up many different metals should help protect this income stream. Moreover, its managers can smooth what they pay out by holding back up to 15% of this cash in good years to return in less stellar periods.

I also think the long-term outlook could be great considering the amount of materials needed for things like electric cars and wind turbines. The possibility of a commodities ‘supercycle’ off the back of the green energy revolution remains a convincing argument for me to invest here.

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 considered so you should consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and Microsoft. 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

Mixed-race female couple enjoying themselves on a walk
Investing Articles

UK shares: 1 burgeoning tech stock to buy for returns and long-term growth!

Jabran Khan is looking for the best UK shares to buy for his holdings that provide excellent returns and growth…

Read more »

Black father holding daughter in a field of cows
Investing Articles

2 FTSE 100 shares I’d buy for lifelong passive income!

These FTSE 100 shares have proved to be excellent dividend stocks for many years. Here's why I think they'll continue…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

1 cheap penny stock that boosts passive income and has great growth prospects!

This Fool likes this penny stock that currently looks good value for money, has an enticing dividend yield, and growth…

Read more »

Sun setting over a traditional British neighbourhood.
Investing Articles

Will the Taylor Wimpey share price rebound soon?

The Taylor Wimpey share price has jumped 10% since it bottomed last month. But will it continue its rally and…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Should I buy this growth stock at £10?

The ASOS share price has tumbled to its lowest price in the last 10 years. Surely at £10 per share,…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is the bear market in stocks over? I fear not!

After the worst first-half bear market in 52 years, US stocks have rebounded in the past month. But what should…

Read more »

Happy male couple looking at a laptop screen together
Investing Articles

Is this FTSE 250 stock one of the best to buy for consistent growth and returns?

Jabran Khan takes a look at whether this FTSE 250 tech stock could be a good addition to his portfolio…

Read more »

Girl and father putting coin into piggy bank, sitting on sofa at home
Investing Articles

Here’s why I’d buy Legal & General shares to bag 7.5% dividends today

Legal & General shares are picking up, as the company reaches the halfway stage in its five-year cash and dividend…

Read more »