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Forget a cash ISA! I reckon these 2 investment trusts will work your money much harder

The average cash ISA pays interest of just 1.5%. Surely you can get a better return on your money? Why, yes you can.

Ice cool

The two investments I’m looking at here are somewhat different to a cash ISA. They spread your money across a range of UK and global stocks in the red hot technology sector, making them high-risk, high-return vehicles.

The first, Polar Capital Technology Trust (LSE: PCT) invests in a portfolio of global technology companies and is big enough to be quoted on the FTSE 250 index. It was launched in December 1996, just as the dotcom boom was picking up speed, and survived the bust in 2000.

Capital idea

Today it announced its results for the six months to 31 October which showed an 8.5% rise in total net to £1.68bn, with the share price up 7% in the period, adjusted for sterling. The weak pound worked in its favour here because in local currency terms it was down 0.7%, although it still beat the FTSE World index over this turbulent period, which fell 3%.

However, Polar Capital Technology Trust has a good long-term track record and will suit those who still believe in the big US and Chinese tech giants, as its top 10 holdings include Google-owner Alphabet, Apple, Microsoft, Facebook, Alibaba and Tencent, a roll call of the big names in technology. The fund has grown a whopping 149% over five years, against 5% for the FTSE 100. My worry is that the US tech surge could be drawing to a close, and the trust is down 11% in the last six months. Nothing lasts forever.

I am therefore wary despite a low annual charge of 1% and discount of 6.45%. There is no dividend. This could be a case of right fund, wrong time. Unless I’m wrong and the technology bull run has further to go.

British tech

Herald Investment Trust (LSE: HRI) invests in quoted small and mid-cap technology, communications and media companies and has a great track record since launch in 1994, turning an initial £1,000 investment into £14,000.

With so many technology funds focusing on the US it is a novelty to see this one has 52% exposure to the UK, with only 24% in the States plus a smattering in Asia-Pacific and international equities. It has an annual charge of 1% but again, no dividend.

Hark the Herald IT

Herald has underperformed US tech-focused trusts as a result, although a return of 62% over five years looks good against just 27% on the FTSE All Share. Its top holdings are less familiar than Polar’s, with names such as GB Group, Diploma and Craneware, although you may know Boingo Wireless, IQE and M&C Saatchi.

The trust has total assets of £927m and currently trades at a massive discount of 19% to net asset value, which suggests to me investors are wary of this sector at the moment. This trust is at the riskier end and you also have to factor in Brexit, I suppose. It could do well if the UK bounces back next year, though.

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Harvey Jones does not hold shares in these two investment trusts. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. harveyj has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Facebook. The Motley Fool UK owns shares of Microsoft and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. 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.