I’ve long been an advocate of investment trusts. I think they’re a great way for retail investors to gain exposure to a variety of stocks in a simple way. There’s also the bonus of, hopefully, some meaty long-term gains.

There are many trusts available to invest in. And many specialise in different areas. However, right now I have my eye on F&C Investment Trust (LSE: FCIT). Here’s why.

The lowdown

So, what exactly does this trust do? And how has it performed across this difficult year?

F&C invests in over 400 companies in 35 countries with the aim “to secure long-term growth in capital and income through a policy of investing primarily in an internationally diversified portfolio of publicly listed equities, as well as unlisted securities and private equity.”

The trust is run by fund manager Paul Niven, who’s been at the helm since 2014. Overall, it manages around £5bn worth of assets.

It’s been a tough year for the stock as it’s fallen around 9% year to date. This is largely due to the bleak economic environment. And with inflation on the charge across the globe, investor sentiment has been dented. The FTSE 100 is down 3% year to date. And in the US, the S&P 500 has plummeted by 18%.

Why I’d buy

With all of this, why would I buy the trust?

My main attraction is the diversification mentioned above. It holds hundreds of companies, including names like Microsoft, Amazon, and AstraZeneca.

By owning the stock, what I essentially do is offset my risk. This is because with a single investment I own a small slither of all of these companies. In the volatile times we’re experiencing, this is important for me.

What’s also an added bonus is the fact that its investment strategy aligns with mine. By this, I mean it buys for the long term. And as a Fool, I believe this is the best way to invest. While past returns are no indication of future performance, the last decade has seen the trust return 170% to its shareholders.

I also like the stock due to its stable nature. The trust is the oldest in the world, meanings it’s survived multiple crises. On top of this, it has increased its dividend payment for the last 51 years, highlighting its consistency.

The risks

With this said, there are risks with F&C.

They largely exist through its exposure to emerging markets, which make up 7.6% of its asset allocation. While these markets can offer great opportunities, they can also be volatile. And given the current economic conditions, these markets could suffer in the near future.

However, as mentioned above, this short-term volatility is of little concern to me. With a long-term approach, issues should be ironed out. In the long run, I back the trust to discover the opportunities that exist within emerging markets. I also like the diversification it could provide my portfolio with. While I don’t have the spare cash right now, if I did, I’d happily buy its shares today.

The post I’d buy this top investment trust today! appeared first on The Motley Fool UK.

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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 has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and 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.

Long-term outlook

The main reason I like this FTSE 250 stock is because of its investment strategy. It aims to secure long-term growth through its diversified portfolio, and for my investing style, this is perfect. This also nullifies issues with volatility, exemplified through its near 80% return over the last five years. Being the oldest investment trust in the world, it has survived multiple challenges – most recently the pandemic. A near 11% rise in the share price since the outbreak of the pandemic shows its strengths.

I also like the look of FCIT’s top holdings. As of June 2021, this included Amazon, Alphabet, and UnitedHealth. The diversification offsets risk while increasing exposure to different markets. A standout for me is its eighth-largest holding, Taiwan Semiconductor Manufacturing Company, which has risen nearly 40% over the past 12 months. Fund manager Paul Niven has been running the trust since 2014 and has been key in FCIT’s recent success. Since he took over the trust is up 125%, a clear indication of his management strength. This gives me real confidence in the future of the FTSE 250 stock.

FCIT risks

With this said, I do have a few issues with FCIT. Firstly, as of June 2021, its third-largest asset allocation was in emerging markets equity. Although emerging markets provide opportunities as they grow, they are often volatile. To add to this, Covid-19 cases in countries such as India and Brazil are still high, and if F&C has invested in affected countries this could have a negative impact. With a long-term outlook, however, I am not put off by this. I believe the prospects that emerging markets can offer outweigh the short-term threat of the pandemic. Instead, a dip in the market may offer greater opportunities. 

Another issue is its large exposure to the US, and more specifically, tech stocks. Although they have rallied over the past few years, with over half (56.2%) of its asset allocation in North American equity, along with its top five holdings being tech stocks, this makes it vulnerable should these stocks experience a dip. We recently witnessed this with the tech sell-off.

Why I’m buying

Although I have highlighted issues such as volatility, I think a long-term perspective quashes these. As many developed countries increase their control over the pandemic, I think the rest of 2021 could see a rise in the FCIT share price. I think the FTSE 250 stock is yet to reach its full potential. Currently trading at around 855p, I deem now a perfect time to buy this stock for my portfolio before potentially missing out.

The post Why I’m buying this FTSE 250 stock appeared first on The Motley Fool UK.

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• This stock market correction could be a rare opportunity to supercharge a SIPP

Charlie Keough owns shares of FCIT. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Taiwan Semiconductor Manufacturing. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on 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.

Monks diversification

Looking at the holdings as of April 2021, it is clear the trust ran by Spencer Adair has a diversified portfolio. Top holdings included companies such as Amazon, Ryanair, and Prudential. This offsets risk, as it allows the trust to maintain a balanced position in multiple sectors. Comparing this to SMT shows the benefits this can provide, as at times this year SMT has suffered due to the tech sell-off.

The idea of diversification also applies to the sector analysis of the investment trust. With technology at the top with over 23%, further down sits health care (13.5%) and other sectors such as real estate (2.9%). Again, this shows the opportunities Monks provides through its diversification. Add to this the ongoing charges of just 0.48%, and I see plenty of potential here to access an array of sectors for a cheap price.

Another factor I really like about Monks is its investing strategy. The trust is focused on long-term capital growth, taking a priority over income. A patient approach suits my investment style, and as such I see real opportunities in this investment trust. I only must look at the 205% return over the past five years to see this in action. Of course, past performance is not an indication of future returns.

Monks risks

With all that said, there are risks to consider. First, the trust has a large weight in US stocks. As of April, this was nearly 50%. This could cause issues, because if the US market underperforms, the investment trust may also underperform.

The trust also has nearly 15% of its holdings in emerging markets, a factor that could cause problems due to ongoing Covid-19 struggles in countries such as India and Brazil. With this said, a long-term outlook should not be affected by potential short-term volatility – and as such, I do not see this as a major issue.

Why I’m buying Monks

Although the trust does come with risks, I believe the opportunities outweigh these potential problems. A long-term outlook is something I look for when investing.

I also like the diversification the trust can add to my portfolio. It offsets risk by allowing me to access a wide variety of sectors and countries. I also am a fan of its relatively large proportion of holdings in emerging markets. The pandemic has had a major impact on these countries, but I think, long-term, these markets can provide great opportunities for capital growth.

The post Why I’m buying this top investment trust for long-term growth appeared first on The Motley Fool UK.

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Charlie Keough owns shares in Scottish Mortgage Investment Trust. 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. The Motley Fool UK has recommended Prudential and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on 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.

Diversified investment trust

As it sounds, the Pacific Horizon Investment Trust (LSE:PHI) is focused on increasing investors’ wealth through buying what its managers consider to be the best growth shares in the Asia-Pacific region and Indian Sub-continent.

Understandably, stocks from big markets such as Hong Kong and China take up roughly a third of the trust’s assets. Another 20% is invested in India. Further down, holders get to own shares from economies such as Vietnam and Indonesia. 

This suits my own investing objectives. While most of my cash remains invested in developed nations, I do want some exposure to those that have very attractive prospects going forward thanks to the rising affluence of their populations. 

With between 40 and 120 holdings at any one time, the trust isn’t overly dependent on a few companies succeeding either. Based on its most recent factsheet, its biggest position is in Singaporean internet giant SEA Limited. Indian carmaker Tata Motors and base metals miner MMG Limited take second and third spots respectively. 

Opportunity?

Up until very recently, PHI has been knocking the ball out of the park. From the March 2020 market crash to mid-February 2021, the share price rocketed roughly 250%. That’s the sort of performance I might get from small-cap companies! Since then, however, it’s lost momentum. 

As much as I see this as an opportunity, buying now is not devoid of risk. Past performance is, after all, no guide to the future. It’s quite possible that the recent weakness seen in the share price will continue for a while if, for example, the pandemic continues to ravage India.

There’s also the 0.92% management fee to consider. Pacific Horizon Investment Trust’s recent returns might dwarf those of an emerging markets index fund but the latter is a far cheaper alternative.

Worth the risk

I think these risks are worth the potential rewards. Timing the market sounds great in theory. However, it’s difficult to do consistently in practice. So, I’ll drip-feeding money into PHI. That may not be the optimum strategy if its share price rises from here. However, it makes the buying process less challenging psychologically. 

With regard to the fees, I’m content to assume that the investment trust’s managers know this part of the global market better than I do. Backing this up, PHI has an active share of 91%. This means its managers are actively picking stocks rather than just tracking one or more indexes. The higher this active share percentage, the more confident I can be that the managers are at least attempting to generate better returns.

As well as offering geographical and sector diversification, PHI can also buy in to private companies like its hugely popular Baillie Gifford peer Scottish Mortgage Investment Trust. This is something passive funds won’t be able to replicate and could make a big difference to performance. 

Long-term hold

The Pacific Horizon Investment Trust is unlikely to generate the same performance in 2021 as it did last year. Even so, I see this as another solid ‘buy-and-forget’ addition to my portfolio. I hope buying now could still lead to great returns over the next 10 years.

The post 1 of the best investment trusts to buy now! appeared first on The Motley Fool UK.

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Paul Summers owns shares in Pacific Horizon Investment Trust and Scottish Mortgage Investment Trust. The Motley Fool UK owns shares of and has recommended Sea Limited. 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.

Having said this, I think there are far better passive fund options for those wanting to really grow their wealth over time. 

FTSE 100 beater

We’ve known for some time that populations across the world are ageing and the demand for healthcare will only increase as a result. The coronavirus pandemic has merely served as a further shot in the arm for the sector. One way of tapping into this is through the iShares Healthcare Innovation UCITS ETF.

With almost two-thirds of the portfolio made up of US stocks, performance at the fund has been excellent. By the end of last month, it had gained 69% since launch in 2016. That return becomes even more impressive when you consider the low 0.4% ongoing charge. For comparison, the FTSE 100 is down 13% over the same period. 

Considering the defensive qualities of the industry, I think this 137-stock fund looks a solid long-term buy for anyone averse to actively picking stocks. 

Look overseas

It’s understandable that many UK investors like to invest their money in their (highly regulated) home market. The problem with this approach, however, is that your capital isn’t as well diversified as it could be. With Brexit likely to rattle on for some time to come, this could compromise returns.  

One way around this is to buy shares in passive funds tracking markets in other parts of the world. For me, the iShares Emerging Markets Core UCITS ETF is one that stands out.

The fund has exposure to 2,700 stocks, including mid- and small-cap companies. As experienced Fools will know, it’s often these firms that can turbocharge performance. The ongoing charge is just 0.18% — not much more than a FTSE 100 tracker. 

By far the biggest draw for me, however, is the fact that some of these markets trade on even cheaper valuations than the UK! When you consider how much the economies of India, Vietnam and South Africa could evolve over the next few decades, now looks like a great time to get involved. 

Get some gold

The gold price has lost some of its shimmer in recent weeks but I think Fools should still have some exposure to the precious metal. After all, its tendency to rise when shares fall may come in handy as the full economic impact of the coronavirus is felt across the world. Despite already performing superbly in 2020, some in the market are suggesting the gold price could rise as high as $3000 per ounce.

A simple fund that tracks the gold price will likely be suitable for most investors. Those with far greater risk tolerance, however, could buy the VanEck Vectors Junior Gold Miners ETF. Its 81-stock portfolio may end up being a lot more volatile than a typical FTSE 100 tracker but it’s arguably a far safer way of betting on the shiny stuff than holding shares in a single company.

Since launch in 2015, the fund has returned a little over 18% annually. The management fee is 0.55%.

The post Forget the FTSE 100. I think these ISA-ready passive funds are begging to be bought! appeared first on The Motley Fool UK.

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• Here’s how a £20,000 Stocks and Shares ISA could one day generate £14,947 of passive income a year
• 5 years ago £10k bought 4,484 Tesco shares. How many would it buy today?
• 3,703 Legal & General shares pay £822 yearly passive income
• 5 years ago, £10,000 bought 9,827 Rolls-Royce shares. But how many would it buy now?
• No savings at 30? How investing £5 a day in an ISA could target a stunning second income of £40,208 a year

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

However, Grantham also said there are areas of the market that are undervalued right now and offer considerable potential. Specifically, he identified one trade he believes has the potential to make investors money in the years ahead. Interested to learn more? Read on, and I’ll tell you about the trade Grantham likes right now. 

The best stocks to buy right now? 

Grantham currently believes US stocks (which many UK investors have exposure to either directly or through funds and investment trusts) are in a bubble. He thinks investors have got carried away and that the market is now very much detached from reality.

However, one area of the stock market that Grantham likes right now is emerging markets, which he believes have been neglected recently.

“Sell your US [stocks] 100% and buy emerging and throw the key away for a few years and you’ll have a story for your grandchildren about how you outperformed the investment professionals,” he told CNBC.

This trade certainly looks interesting, to my mind.

While I’m bullish on US equities in the long term, the market does look a little overheated right now, in my view. I wouldn’t be surprised if we see a near-term correction. Meanwhile, emerging markets have underperformed in recent years, so there’s a chance they could potentially outperform in the years ahead.

An easy trade to make 

Interested in gaining some portfolio exposure to emerging market stocks? It’s not hard to do. 

One of the easiest ways to get exposure to the world’s emerging markets is through investment trusts. On the London Stock Exchange, there a number of trusts that offer exposure to these markets, including:

• Fundsmith Emerging Equities Trust, which is run with a similar philosophy to that of the Fundsmith Equity fund

• JPMorgan Emerging Markets Investment Trust

• Templeton Emerging Markets Investment Trust

Exchange-traded funds (ETFs) can also be an easy way to gain exposure to the emerging markets.

Examples of ETFs that focus on the emerging markets include:

• Vanguard FTSE Emerging Markets ETF

• iShares MSCI Emerging Markets ETF

FTSE 100 stocks with EM exposure

It’s also worth pointing out that many UK-listed companies generate a large proportion of their revenues in the world’s emerging markets, so could also provide you with exposure.

Examples include:

• Prudential, which is now mainly focused on selling insurance and other financial services products in Asia

• Unilever, which generates over 50% of sales in the emerging markets

• Diageo, which expects another 750m consumers to be able to afford its premium spirits by 2030, thanks to growth in the emerging markets

All in all, there are plenty of ways to get exposure to the emerging markets. 

Think long term with the stock market

Of course, emerging market stocks can be volatile. It’s important to be aware of the risks.

However, all things considered, having a little bit of exposure to emerging market stocks, with a long-term view, could be a good move, in my opinion. 

The post A top British investor says this is the trade that’s likely to make you money in the years ahead appeared first on The Motley Fool UK.

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• Here’s how a £20,000 Stocks and Shares ISA could one day generate £14,947 of passive income a year
• 5 years ago £10k bought 4,484 Tesco shares. How many would it buy today?
• 3,703 Legal & General shares pay £822 yearly passive income
• 5 years ago, £10,000 bought 9,827 Rolls-Royce shares. But how many would it buy now?
• No savings at 30? How investing £5 a day in an ISA could target a stunning second income of £40,208 a year

Edward Sheldon owns shares in Unilever, Diageo and Prudential. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo 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.

December was a particularly rough month for investors after the company revealed that underlying sales growth for 2019 would come in slightly below previous guidance as a result of problems in India and China. The Marmite-maker also stated that growth over the first half of 2020 would likely be below 3%.

Having been such a reliable performer for so many years, is this loss of form a sign that its crown is slipping or a chance for prospective buyers to take a stake on temporary weakness? I’m inclined to say the latter. 

Growing pains 

Granted, today’s full-year results were nothing to shout about. As predicted, underlying sales were lacklustre, increasing just 1.5% in the fourth quarter and 2.9% over 2019 as a whole. That said, both percentages were slightly higher than some analysts were expecting. Homecare — the smallest of the firm’s three divisions — provided the biggest lift, registering growth of 6.1%.

Despite difficult trading in West Africa, South Asia and the Middle East at the tail end of 2019, sales in emerging markets (a key source of growth for Unilever) also climbed 5.3%. Developed markets “remained challenging” however, especially Europe.

At €6bn, net profit was down 38.4% from the previous year due to the sale of its spreads business in 2018. In related news, it was announced today that management would be carrying out a strategic review of its global tea business (which includes brands PG Tips, Lyons and Lipton) suggesting another sale is on the cards.

Commenting on the company’s outlook, CEO Alan Jope — who has now been in post for a year — said that underlying sales growth in 2020 was now likely to be “in the lower half of the multi-year 3-5% range” and “second-half weighted”. He reiterated that growth over the first half of Unilever’s financial year would be “below 3%” before adding that it wasn’t possible to gauge the impact of the coronavirus outbreak on trading at the current time.

Opportunity knocks?

Unilever’s shares were up slightly in early trading, suggesting that market participants were generally satisfied with today’s statement.

Based on analyst projections for 2020, this leaves the shares trading on 19 times expected earnings — slightly below the five-year average of 21. While not offering incredible value, I do think this might be a price worth paying for a company with huge geographical diversification and still generating massive free cash flow (€6.1bn in 2019).

The return on invested capital — a metric of supreme importance to one of the UK’s best-performing fund managers — has also been consistently high over the years. In 2019, this rose to 19.2%. Many companies would love to report such a number to their investors. 

Of course, the recent fall in the share price also means a larger dividend for those willing to stick around while the business is reshaped. A mooted 181 euro cents (153p) per share total return in 2020 translates into a decent yield of 3.4%.

To say that there is a ‘perfect’ time to buy stocks is stretching things a bit since no one knows where markets will head over the short term. Notwithstanding this, I’m confident the Unilever share price will recover and regard the recent decline as a buying opportunity. 

The post Is now the perfect time to buy FTSE 100 stalwart Unilever? appeared first on The Motley Fool UK.

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• Value investors: Unilever shares are down 7% in a day!
• Could getting out of the food business help the Unilever share price?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. 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.

One such company is Vivo Energy (LSE: VVO), which is the licensee of the Shell service station brand in 15 African countries that together boast 277m consumers. The company currently runs 1,800 service stations stretching from Botswana to Morocco that are experiencing rapid urbanisation, vehicle usage and economic development.

By running stations for a trusted brand name, Vivo is well-placed to benefit from these trends. Indeed, in the first half of the financial year, it recorded a 4% uplift in the volume of petrol it sold to consumers. But petrol and associated vehicle products like lubricants and car washes aren’t the only driver of growth as Vivo is placing a great emphasis on Western-style retail sales and restaurants at its service stations.

The shift towards these profitable retail operations helped boost gross profits 6% during the period to $312m with adjusted EBITDA increasing 8% $204m. And with net debt at just 1 times full-year EBITDA, the group’s balance sheet is in good shape. Together, solid cash flow being generated from operations as well as access to debt funding provide a solid base for Vivo Energy to continue expanding operations in current countries and beginning them in other ones.

However, despite Vivo’s solid growth prospects the company’s exposure to a wide variety of developing markets, any would-be investors should do extra due diligence before considering investing.

More wealth equals better health? 

This is also true of another fast-growing African business I’ve got my eye on, Integrated Diagnostics Holdings (LSE: IDHC). As its name suggests, IDHC runs 383 medical diagnostic testing branches in Egypt, Jordan, Sudan and, recently, Nigeria.

Just like Vivo, IDHC is taking advantage of rising populations, incomes and health problems to sell its services to increasingly wealthy customers. In the first quarter of its financial year, the group’s revenue rose 29% year-on-year to EGP446m with net profit up 24% to EGP110m.

As these results show, the company is not only growing quickly but is also profitable. Indeed, for the full year, management is guiding for 20% revenue growth and EBITDA margins in excess of 40% at its operations outside of Nigeria, which have just begun and are currently lossmaking.

Although its 12 Nigerian locations are not profitable at the moment, the long-term potential for IDHC in Africa’s most populous country is understandably impressive. And as Nigeria beefs up, the company is still growing steadily in its home markets with new branches opened in each of its three core markets in Q1 and a solid increase in the revenue per test it received during the period.

IDHC has pretty solid growth prospects, but UK investors should be extra cautious considering the currency woes that have hit the company’s USD and GBP results stemming from Egypt’s turbulent political and economic environment. 

The post Forget other emerging markets. Why these African stocks have enormous growth potential appeared first on The Motley Fool UK.

More reading

• Here’s how a £20,000 Stocks and Shares ISA could one day generate £14,947 of passive income a year
• 5 years ago £10k bought 4,484 Tesco shares. How many would it buy today?
• 3,703 Legal & General shares pay £822 yearly passive income
• 5 years ago, £10,000 bought 9,827 Rolls-Royce shares. But how many would it buy now?
• No savings at 30? How investing £5 a day in an ISA could target a stunning second income of £40,208 a year

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

If you’re aiming to generate high returns over the next decade, it could pay to diversify your portfolio outside the FTSE 100. Here’s a look at three ETFs that could potentially generate strong returns over the next 10 years.

Technology

If you’re looking to capitalise on advances in technology, take a look at the ROBO Global Robotics and Automation GO UCITS ETF (LSE: ROBG). This ETF tracks an index of companies that are involved in the robotics industry. Over the last three years, it’s returned nearly 80%. 

Robotics is not a new field, but robot technology has advanced significantly in recent years and looking ahead, the industry has the potential to grow at an exponential rate. Robots are now significantly more intelligent than they were in the recent past and today’s robots can perform sophisticated tasks across a wide range of industries.

Already, many companies are employing the technology to enhance productivity. Amazon, for example, uses a large number of bots in its warehouses. By 2030, up to a third of UK jobs could be done by robots, according to consultancy firm PricewaterhouseCoopers. As such, now could be a good time to invest in the sector, while it’s still in its infancy.

But do note that an ETF of this kind is higher risk than a FTSE 100 ETF. Therefore, it may not be suitable for all investors.

Emerging markets

One ETF that looks to offer excellent exposure to fast-growing economies is the Vanguard FTSE Emerging Markets UCITS Fund (LSE: VFEM).

It specialises in a high-growth area that really could be worth considering if you’re looking for strong long-term returns: the world’s emerging markets. They are home to 80% of the world’s population and are growing at around twice the pace of developed markets. From a long-term investment perspective, there’s significant appeal.

Vanguard tracks an index of large and mid-cap companies in countries across Asia, Africa, Latin America and Europe. It currently holds over 1,000 stocks with strong exposure to China, Taiwan and India. It could be a rewarding investment for those with a long-term mindset.

Mid-caps

Lastly, if the ETFs listed above are too adventurous for you, consider the Vanguard FTSE 250 UCITS ETF (LSE: VMID). This ETF is UK-focused, but instead of tracking large-cap companies, it tracks the largest 250 stocks outside the FTSE 100.

The FTSE 250 is home to many fast-growing companies, and as a result, the index has historically generated excellent long-term returns for investors. For example, for the five years to the end of May, investors enjoyed returns of 10.7% per year. That’s a 50% higher return than the FTSE 100 each year. 

For those who prefer to invest in the UK, yet would like a little more growth over the long term, VMID could be a good UK-focused play.

The post 3 ETFs that could smash the FTSE 100 over the next decade appeared first on The Motley Fool UK.

More reading

• Here’s how a £20,000 Stocks and Shares ISA could one day generate £14,947 of passive income a year
• 5 years ago £10k bought 4,484 Tesco shares. How many would it buy today?
• 3,703 Legal & General shares pay £822 yearly passive income
• 5 years ago, £10,000 bought 9,827 Rolls-Royce shares. But how many would it buy now?
• No savings at 30? How investing £5 a day in an ISA could target a stunning second income of £40,208 a year

Edward Sheldon has no position in any stocks mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

However, some investors may see this as a contrarian opportunity to buy into weakness. Certainly, the escalating trade tensions and political instability should be taken seriously, but the sell-off in emerging markets may have been overdone. Some analysts reckon valuations have already adjusted sufficiently to compensate for the increased risks, while the longer-term outlook for emerging markets remains fundamentally attractive.

Discount to NAV

What’s more, there are a number of emerging market-focused investment trusts which continue to trade at a significant discount to their net asset values (NAVs), giving investors the opportunity to pick up shares in such funds for a price which is significantly below the value of their underlying investments.

One fund with a particularly wide discount to its NAV is the Templeton Emerging Markets Investment Trust (LSE: TEM). With a discount of just over 15%, the fund is trading at its widest discount to its NAV for nearly two years.

Aside from the recent sell-off in emerging markets, another cause for its widening discount may be the recent change in its fund manager. Veteran fund manager Mark Mobius, who had been at the helm of the fund for 26 years, retired earlier this year, and was replaced by Chetan Sehgal.

Consumer bias

In terms of allocation, the fund tilts towards countries such as China, South Korea, Brazil and Russia. Sector-wise, the trust is noticeably overweight towards consumer discretionary stocks, which account for 19.3% of its total assets, compared to just 9.5% of the benchmark MSCI Emerging Markets Index.

The consumer discretionary sector has been a persistent favourite for the fund, and is an area which seems best placed to benefit from domestic consumption growth in emerging markets. The consumption theme goes beyond goods and also include services, which are coming to represent a greater proportion of the emerging market economy. Demonstrating this, it has substantial exposure to the Chinese IT sector, via stakes in Naspers (6.1%), Alibaba (4.4%) and Tencent (3.2%).

Frontier markets

Despite the recent rout in emerging markets, frontier-markets funds have remained popular. Such funds invest in smaller countries which are at an earlier stage of economic or political development than many larger emerging markets. 

Frontier-markets funds haven’t quite entered into the mainstream, and there aren’t very many of them of them on the market — with a demand-supply imbalance, many investment trusts in this space trade at a modest premium.

One such fund is the BlackRock Frontiers Investment Trust (LSE: BRFI), which currently trades at a 4% premium to its NAV. Launched only back in 2010, the fund has realised impressive returns during its short life. Over the past five years, shares in the trust have delivered a cumulative return of 72% — nearly double the performance of its benchmark MSCI Frontier Markets Index, which gained only 39%.

Its most recent performance has been less remarkable, however. Shares in the fund are down 6% year-to-date, following a sell-off in Argentina, its biggest country exposure, and a general shift in sentiment away from riskier assets.

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Jack Tang has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.