Contributing to a SIPP (Self-Invested Personal Pension) is one of the best ways to build wealth in the UK. Not only does an investor here typically receive tax relief on contributions, but they can also grow their capital free of tax.
Have money in a SIPP but not sure where to invest it? Here are three top investments to consider.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
A top healthcare fund
First up, we have the Schroder Global Healthcare fund. This is an actively-managed fund focused on the Healthcare sector.
I’ve been investing in this fund within my own SIPP recently and there are a few reasons why.
Firstly, the healthcare industry looks set to benefit from the world’s ageing population over the next decade. So there’s a long-term growth story here.
Secondly, Healthcare is a relatively ‘defensive’ sector. So my investment is unlikely to tank if we see a recession.
Additionally, I really like this portfolio. The fund provides access to some brilliant companies including Eli Lilly, Novo Nordisk, Thermo Fisher Scientific, and AstraZeneca.
This product has a great track record, having returned about 60% over the last five years.
But, as always, past performance is no guide to future returns. There’s always a chance that healthcare stocks could underperform in the near term.
A tech-focused investment trust
Another sector with significant long-term growth potential is Technology.
And one way to get exposure here is the Allianz Technology Trust (LSE: ATT). This is a tech-focused investment trust that’s traded on the London Stock Exchange.
What I like about this trust is that it provides exposure to a broad range of technology businesses. Not only does it hold the mega-cap tech stocks such as Apple, Microsoft, and Nvidia but it also holds smaller, up-and-coming players such as Datadog and MongoDB.
I also like the fact the trust is managed by the very experienced AllianzGI Global Technology team. This team is based in San Francisco, which is next door to Silicon Valley (where many of the world’s top technology companies are based).
On the downside, this trust does have a performance fee, which kicks in if performance is above its benchmark. This fee could eat into investors’ returns over time.
A no-brainer growth stock?
Of course, one way to get around fund manager fees is to invest in companies directly.
And that leads me to my third investment idea for a SIPP – Alphabet (NASDAQ: GOOG) stock.
For those with a long-term investment horizon, this stock is a bit of a no-brainer, to my mind.
Alphabet is one of the most dominant technology companies in the world, and investing in the company gives exposure to a range of exciting growth industries including artificial intelligence (AI), digital advertising, video streaming (it owns YouTube), cloud computing, autonomous vehicles, and more.
Meanwhile, it’s not particularly expensive from a valuation perspective. At present, the stock trades at just 22 times next year’s forecast earnings, which is a very reasonable valuation, in my view.
Of course, buying individual stocks opens investors up to stock-specific risks. And there are a few risks to be aware of here, including competition from rivals and regulatory fines.
In the long run however, I expect the company to generate strong returns for investors.
