I would love to work less when I’m in my 50s and rely on a passive income. I’m sure many of us feel the same way. However, I’m now 18 years away from my 50s and my current forecasts suggest it won’t be easy for me to retire at that point.
True, almost maxing out my ISA contributions and achieving an annualised rate of return of 10% would take me to £2m. And while that sounds like a lot, we’ve got to take account of inflation and the fact that I may live several more decades after that.
The solution, which is no longer available to me, is to have invested more consistently from the moment I took my first salary. While I contributed to my ISA here and there, regular contributions would have made a huge difference. One of my excuses for not investing monthly was… “I’ll earn more when I’m older”.
And what I really wish I understood properly was the value of compounding. For example, if I had just 10% of my current portfolio 10 years ago, and then committed to maxing out my ISA while achieving a 10% annualised return over 28 years, I’d have £3.5m by the time I reach 50.
And yes, I’m going on about compounding, but it’s why more parents, if they can, should consider utilising the Junior ISA. With 50 years of compounding, early retirement’s very possible.
A core investment for building a portfolio
Most people wish they could invest in the Medallion Fund by Renaissance Technologies, famous for its extraordinary annualised returns of over 30%. And that’s after its extraordinarily high fees.
Sadly, that’s not possible for the average investor — it’s closed to the public. So it’s necessary to look at listed alternatives. Monks Investment Trust (LSE:MNKS) is one such opportunity that investors should consider for the long run.
Managed by Baillie Gifford, the investment trust offers a globally diversified portfolio of growth companies. It balances rapid growers like Nvidia with more defensive stalwarts like Mastercard and cyclical names such as Ryanair.
Over the past decade, Monks has delivered a share price total return of nearly 184%, with NAV up 188%. That closely tracks global equity indexes. While recent years have seen more muted returns — partly due to a market focus on a narrow set of mega-cap tech stocks — the trust’s current 10% discount to NAV may offer a rare entry point for long-term investors.
It’s also much more diversified that its better known sibling, the Scottish Mortgage Investment Trust. Monks’ approach is patient and diversified, with no single theme or sector dominating. This reduces the risk of being caught out by market fads or bubbles.
However, there are risks, including modest gearing around 5% and the chance that the discount persists if sentiment remains cautious. However, for investors seeking long-term capital growth through global diversification, Monks Investment Trust could be a viable option. It’s a core part of both my own and my daughter’s pensions.
