Investing in retirement is all about balance. On one hand, you want to generate a healthy income from your assets, and also ideally a little bit of capital growth too, as retirement could last 30 years or more. You don’t want to run out of money. On the other hand, you also need to focus on capital preservation. It’s not the time to be taking big risks with your savings.
With that in mind, here’s a look at two investment trusts that I feel could be well suited to retirees. Both offer a nice mix of income, capital growth, and security.
Murray Income Trust
The first pick I want to highlight is the Murray Income Trust (LSE: MUT), which was founded all the way back in 1923. Its objective is to generate a high and growing income stream for its investors combined with a little bit of capital growth. This trust has a four-star rating from financial services group Morningstar.
I like this trust for several reasons. For starters, it’s mainly focused on blue-chip FTSE 100 dividend stocks. For example, top holdings in the portfolio currently include the likes of Diageo, Prudential, GlaxoSmithKline, and Unilever. This gives the portfolio a nice ‘defensive’ tilt.
Second, the trust is allowed to invest 20% of its capital internationally, which is a handy feature as there are many fantastic companies listed outside the UK. Currently, the trust has exposure to international companies such as Microsoft and healthcare giant Roche.
Third, not only does the trust have a high dividend yield (3.9%) but it also has a fantastic dividend growth track record having increased its dividend for 45 consecutive years now. That makes it an Association of Investment Companies (AIC) ‘dividend hero’ – the prestigious classification for trusts that have registered 20 or more consecutive dividend hikes.
With fees of just 0.69% per year, I think this could make an excellent addition to a retiree portfolio.
Another one that I believe could be well suited to retirees is the Merchants Trust (LSE: MRCH). Founded in 1889, this has a specific focus on generating high income for its investors as well as some capital growth, and it’s also an AIC dividend hero, having registered 37 years of consecutive dividend growth now.
An analysis of the MRCH portfolio reveals that it also has a strong focus on FTSE 100 dividend stocks. For example, the top three holdings at the end of May were Royal Dutch Shell, GlaxoSmithKline, and HSBC Holdings. It’s these kinds of high-yielding income stocks that have helped the trust to pay extremely generous dividends to its investors in recent years – the current yield is a fantastic 5.3%. Dividends are paid quarterly too, which is an added benefit.
With its high dividend yield and ongoing charges of just 0.59% per year, I think the Merchants Trust could be an attractive proposition for investors who are looking to supplement their income in retirement while not taking big risks with their money.
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Edward Sheldon owns shares in the Diageo, Unilever, Prudential, Murray Income Trust, Royal Dutch Shell and GlaxoSmithKline. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline, Microsoft, and Unilever. The Motley Fool UK has recommended Diageo, HSBC Holdings, and Prudential. 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.