Investing in the lead up to retirement is all about balancing risk with reward. Naturally, you still want to grow your wealth. Yet now isn’t the time to be taking big risks with your money.
Investing in income-focused investment trusts is a good way to achieve this balance, in my view. With these kinds of investment trusts, you can potentially generate a nice mix of income and capital gains over time, while keeping overall portfolio risk relatively low.
With that in mind, here’s a look at two lower-risk investment trusts I like for income and growth.
Murray Income Trust
The first investment trust I’d like to highlight is the Murray Income Trust (LSE: MUT). Its aim is to achieve a high-and-growing income combined with capital growth, and comes with a 5-star rating from research group Morningstar.
The reason I believe this trust is well suited to those nearing retirement is that it predominantly invests in large, well-known FTSE dividend-paying companies, such as GlaxoSmithKline and Diageo.
This provides an element of stability. However, what sets it apart from many other UK income investment trusts is that it has the flexibility to invest a little bit of capital internationally, which is an advantage when it comes to generating growth. For example, the trust has benefitted from having US-listed Microsoft in its portfolio recently – the technology stock is up over 100% in the last two years.
I also like the fact the trust has a solid performance track record (it has comfortably outperformed the FTSE All-share index over one, three and five years) and that it’s an AIC (Association of Investment Companies) ‘dividend hero’. This means it’s notched up at least 20 consecutive dividend increases.
Overall, I see MUT as a top choice for those looking for income and growth in the lead up to retirement. Ongoing charges are a reasonable too, at 0.65% per year.
City of London Investment Trust
Another lower-risk investment trust that I believe is well suited to those approaching retirement is City of London (LSE: CTY). Its objective is to provide long-term growth in income and capital, principally by investment in UK equities. It has a 4-star rating from Morningstar.
If you’re looking for a ‘sleep-well-at-night’ investment, CTY is a good choice, in my opinion. That’s because portfolio manager Job Curtis – who has managed the trust for nearly three decades – is a very conservative investor. You can rest assure that he won’t be taking big risks with your money. Top holdings in the trust currently include FTSE 100 names such as Royal Dutch Shell, Diageo, and Unilever.
CTY has a solid long-term performance track record. Over the 10 years to 31 December 2019, it outperformed its benchmark, the FTSE All-Share index, by a wide margin. It also has a brilliant long-term dividend growth track record and is another AIC dividend hero.
All things considered, I see City of London as a good investment trust for those seeking income and growth with a lower level of risk. Ongoing charges are low, at 0.39%.
Edward Sheldon owns shares in Murray Income Trust, GlaxoSmithKline, Unilever, Diageo, Microsoft, and Royal Dutch Shell. 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 and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. 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.