Investment trusts are a great way for both new and experienced investors to gain access to the stock market. They provide exposure to an array of diverse high-end stocks, for a cost-efficient price.
F&C Investment Trust
Being the oldest investment trust in the world, investing in over 400 companies in 35 countries, the objective of F&C Investment Trust is to secure long-term growth in capital and income through its internationally diversified portfolio. I see the trust ran by fund manager Paul Niven as a great way to add stability to my portfolio – especially since the announcement that the trust will be increasing its dividends for a 50th consecutive year.
Its top holdings offer exposure to a variety of sectors through companies including Microsoft, Amazon, and UnitedHealth, to name a few. The trust also puts emphasis on emerging markets, with the third largest asset allocation being emerging market equities (as of March 2021) – and this paid dividends as the March report highlighted the trust’s outperformance in a falling market. Although deemed a traditional investment trust, F&C Investment Trust is adapting, as seen by the recent announcement of plans to reach a carbon-neutral portfolio by 2050.
The lagging emerging market may provide a problem for the trust as it has a large weight in this sector. A recent surge in coronavirus cases, most notably in Brazil and India, may mean some of its top holdings could take a hit as these countries suffer.
With that said, the trust is set up for the long term – and as such is in a good position to cope effectively with the volatility that we may see in the short term.
Scottish Mortgage Investment Trust
With a market value of £18bn, the trust aims to invest in a high conviction, global portfolio of companies with the aim of long-term returns. With the current share price hovering around 1,220p, that is nowhere near the 52-week high of 1,418p of February last year.
The investment trust has a top 10 holding that invests heavily in tech companies. Its top three holdings are Tencent, Illumina and ASML, and its top 10 holdings make up 45.3% of its total portfolio (as of March 2021). This provides positive signs as, despite the recent dip, I still have a bullish outlook on the tech industry due to its continuous expansion and growth.
The investment trust recently also saw itself diversify into the world of cryptocurrency, which gives it an additional edge over many investment trusts.
With this said, I am obviously wary of buying due to the current dip in tech stocks. On top of this, the trust is trading at a high price, and as my fellow Fool Cliff D’Arcy wrote in April, I must question how much further it can rise.
However, both trusts are designed for long-term investment – and as such, I do not see the short-term volatility they face posing a problem for long-term returns. The depressed prices of both trusts this month is why I am using now as a good time to buy.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough owns shares in F&C Investment Trust and Scottish Mortgage Investment Trust. The Motley Fool UK has recommended ASML. 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.