Investment trusts are the perfect instruments to use if you want to grow your wealth with minimal effort. Unlike equity funds, they are managed like investment companies, so they can own a much broader selection of assets.
The Witan Investment Trust (LSE: WTAN) is a great example. It owns a broad selection of assets, which has helped it generate a steady return for investors over the past 10 years. Indeed, over the past decade, the trust has produced a return of 127%, outperforming the FTSE 100 by 109% excluding dividends.
Strength in diversification
Witan’s strength lies in its diversification. The trust invests in markets across the globe, seeking out the best deals wherever they are. At the end of November, the top three holdings were private equity fund Princes Private Equity, investment bank JP Morgan and Syncona, another investment trust with a focus on life sciences.
Witan is positioned to produce a positive performance in any market environment, which is why I believe that the trust is an excellent buy for 2018. If markets around the world continue to rally throughout 2018, then the shares will rally as well. However, if the current bull market runs out of steam, then Witan is diversified enough to be able to continue to outperform in a turbulent environment. The shares currently support a dividend yield of 1.9%, and the annual management charge is 0.75%.
Another one that I believe is set to outperform in the year ahead is the Scottish Mortgage Investment Trust (LSE: SMT). Unlike Witan, which is well diversified across markets and sectors, Scottish Mortgage is heavily invested in tech stocks. Specifically, retail giant Amazon and Chinese internet giants Tencent and Alibaba. Together these three holdings account for 22.2% of the fund.
Scottish Mortage’s manager James Anderson believes that these companies will continue to dominate not just the online retail space, but the internet in general and many City analysts seem to agree. Amazon’s rise over the past decade has been meteoric, and despite its growth so far, the group still has a long runway for growth in front of it. And the same can be said for Tencent and Alibaba, which will both continue to grow as China’s economy continues to expand.
If you’re looking for a way to play the global tech boom, then Scottish Mortage seems as if it is the right company for you. Over the past five years, this trust has managed to pick the best tech stocks in the world, and shareholders have reaped the rewards as a result.
Since the end of 2013, it has produced a total return of 209%, outperforming the Nasdaq tech index by 79% over the same period. Thanks to this performance, the shares trade at a slight premium to net asset value of approximately 1% and yields just under 0.7%. The annual management charge is 0.44%.
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended 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.