On average, investment trusts tend to have lower management charges than open-ended funds, and historically, they have delivered better returns too.

Preserve capital

For novice investors looking for a defensive investment, then the Ruffer Investment Company (LSE: RICA) deserves a closer look.

The trust was set up in 1994 by Jonathan Ruffer, and is currently managed on a day to day basis by Steve Russell and Hamish Baillie. It aims to preserve capital in all market conditions, while delivering an investment return ahead of that from cash.

The fund does this by investing in a wide range of asset classes, which include equities, bonds, gold and currencies. It’s defensively positioned, with just 45% of its portfolio invested in equities and other growth holdings. The remainder of its assets is mostly invested in index-linked bonds, which protects it from rising inflation and recession risk.

Pricey valuations

To explain the fund’s defensive positioning, the managers say they are worried about pricey valuations in stock markets and technical stresses and skews in financial markets. As they reckon the risk of a sharp sell-off in asset markets remains high, the fund holds significant positions in a number of options and protective illiquid strategies, giving it additional downside protection against a major sell-off.

Although the fund tends to only outperform traditional equity funds during bear markets, overall returns haven’t been all that bad in recent years in spite of its defensive strategy. Over the past five years, the fund has delivered total net asset value (NAV) returns of 19%, earning it a return significantly greater than cash savings.

Higher returns

Meanwhile, RIT Capital Partners (LSE: RCP) may be a better buy for investors looking for higher returns. The investment trust, which is chaired by Lord Rothschild, is renowned for its strong long-term performance and its agile investment approach.

Although, on balance, RIT Capital Partners is still considered as a “risk-averse” fund, it is somewhat more aggressively positioned than the Ruffer fund. On the positive side of things, the fund has delivered superior returns to the Ruffer fund, with a total NAV gain of 61% over the past five years.

Diversified approach

In addition to an equity exposure averaging 44% over the past 12 months, it is also invested in private unquoted companies and absolute return and credit assets. This diversified approach, overlaid with its prudent currency positioning and macro exposure management, should help it to deliver an attractive combination of long-term growth and capital preservation.

Fund management charges are relatively low, with an ongoing charges ratio of 0.66%. Shares in the fund currently yield 1.7% and trade at a 2.4% premium to its last reported NAV.

The post 2 top investment trusts for a starter portfolio appeared first on The Motley Fool UK.

More reading

• This value stock could turn £2k into £2,860 this year
• Thank goodness I didn’t buy Greggs shares in 2025
• Legal & General shares: still seen as a dividend stock — but that may be outdated
• 13,000 more reasons why I’m avoiding IAG shares!
• This FTSE 250 stock fell by over 3% after solid earnings. Should investors consider buying it?

Jack Tang has no position in any 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.

Investment trusts are a great option. The best thing about these companies is that they usually have a long history of generating returns for shareholders, which gives potential investors plenty of data to analyse and make an informed decision.

The Herald Investment Trust (LSE: HRI) is a great example. This firm has been operating since 1994, and over this period its net asset value has grown by 1,229%, enough to turn an initial investment of £1,000 into £14,000. This record of value creation makes the trust a perfect investment for the beginner investor.

Global diversification 

Herald invests its cash for investors across the world. At the end of 2017, around half of its assets were invested in growth opportunities in Asia with the other half spread between Europe and North America. Such broad diversification is difficult for the average investor to accomplish, but has numerous benefits. 

Indeed, by investing its assets across the world, Herald’s returns are not going to be held back by the poor performance of just one region. As the European economy has struggled over the past few years, the company has profited from its exposure to fast-growing Asian regions.

Herald’s performance record and global exposure make it the perfect pick for beginner investors although the one downside of the trust is its relatively high cost with an annual ongoing charge of 1.09% per annum. Still, considering its global diversification I believe that this is a price worth paying. Management is also returning cash to investors by way of a share buyback in an attempt to narrow the 13% discount to net asset value the shares are currently trading at.

Protecting your money 

Another investment trust that has a multi-decade record of generating outperformance for investors is RIT Capital Partners (LSE: RCP). 

Since its founding in 1988, the trust has produced an annual return of 12.9%, turning an initial £1,000 investment into just over £38,000. Unfortunately, this performance has come at a cost. The annual charges for this fund are 1.2%, although it does also support a dividend yield of 1.7%, unlike Herald.

RIT’s key goal is capital preservation and it does this by investing across a broad range of assets via a broad array of funds and high-quality equities. The firm also invests in private equity businesses, which produce returns uncorrelated to equity markets, this means it has a degree of insulation from wild market swings. In total, single stocks account for around 10% of its portfolio with the remainder made up of hedge funds and other investment funds, giving it exposure to equities all over the world and a broad selection of financial instruments and assets. 

There’s also a small portion of the portfolio devoted to property, gold and fixed income securities. It would be virtually impossible for the average investor to build a portfolio of this size and diversification, which is why I believe RIT could be an invaluable addition to any portfolio. Even though the trust is expensive, its returns and diversification more than make up for the extra cost incurred.

The post The best place to invest your first £1,000? Consider these two investment trusts appeared first on The Motley Fool UK.

More reading

• This value stock could turn £2k into £2,860 this year
• Thank goodness I didn’t buy Greggs shares in 2025
• Legal & General shares: still seen as a dividend stock — but that may be outdated
• 13,000 more reasons why I’m avoiding IAG shares!
• This FTSE 250 stock fell by over 3% after solid earnings. Should investors consider buying it?

Rupert Hargreaves owns no share 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.

These two investment trusts are conservatively managed, with capital preservation as their first priority. While they may not rise as extravagantly as some of their peers in raging bull markets, they don’t fall as heavily when markets crash. By this means, they’ve built up their long records of market outperformance.

RIT large

RIT Capital Partners is chaired by Lord Rothschild and enables private investors to invest alongside the famous family of financiers to protect and enhance their wealth over the long term.

According to the trust’s latest results, “£1,000 invested in RIT at inception in 1988 would be worth in excess of £30,000 today compared to the same amount invested in the MSCI All Country World Index which would be worth approximately £6,700.” And this has been achieved by the trust having “participated in 75% of market upside but only 39% of market declines.”

Part of RIT’s success comes from its ability to invest without restraint. It’s able to allocate capital internationally, across a range of asset classes, both quoted and unquoted. It also utilises the talents of some external fund managers, providing exposure to investment areas (for example, hedge funds) that are largely inaccessible to small private investors.

Currently, with “share prices have in many cases risen to unprecedented levels at a time when economic growth is by no means assured,” the trust is cautious. It stated in its latest results: “We do not believe this is an appropriate time to add to risk.” Regular quoted equity (long) represents 36% of the portfolio, with the remainder in diverse assets, notably absolute return & credit (25%), private investments (22%) and hedge funds (21%).

PAT on the back

Personal Assets Trust’s investment policy is “to protect and increase (in that order) the value of shareholders’ funds per share over the long term.” As well as the similar philosophy to RIT, PAT shares its current cautious view of markets, stating: “After a prolonged bull market in both bonds and equities we therefore remain focused on capital preservation, not the maximisation of upside.”

PAT’s equity exposure is 43%, with its holdings being predominantly defensive global giants. Its current top five positions are Philip Morris, British American Tobacco, Microsoft, Nestlé and Coca-Cola. In contrast to RIT, hedge funds and private investments don’t feature, with the remainder of PAT’s portfolio being in US and UK inflation-linked and short-dated government securities (44%), gold (9%) and cash (5%).

So, while RIT and PAT share a common investing philosophy and current general outlook on markets, their portfolios are far from identical, making both trusts well worth holding, in my view.

The post Two investment trusts I’d buy and hold for 25 years appeared first on The Motley Fool UK.

More reading

• This value stock could turn £2k into £2,860 this year
• Thank goodness I didn’t buy Greggs shares in 2025
• Legal & General shares: still seen as a dividend stock — but that may be outdated
• 13,000 more reasons why I’m avoiding IAG shares!
• This FTSE 250 stock fell by over 3% after solid earnings. Should investors consider buying it?

G A Chester has no position in any of the shares mentioned. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. 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.

RIT Capital Partners (LSE: RCP) is one of the most successful investment trusts there is. Chaired by Lord Rothschild, since 1988 the company has produced an annual return of 12.9% for investors, turning £1,000 into £30,000. 

Since 1990, it has returned 470%, eclipsing the FTSE 100’s return of 19.5% over the same period excluding dividends. 

Finding value of the market 

Today RIT reported its results for the first half of the year, which showed yet another strong investment performance. Net asset value per share increased to 1,784p with a total return of 4%, from 1,730p, while pre-tax profit rose to £111.1m from £89.6m.

One of the greatest benefits of investing in RIT is that the firm is able to put its money into unquoted companies, offering a level of diversification not available to most private investors. Indeed, today the company reported that its net quoted equity exposure averaged 43% during the first half and management has been looking for more private market opportunities to reduce exposure to expensive public markets. To that end, RIT has invested in US-based Social Capital LP, which it called one of “Silicon Valley’s leading technology investment firms“. 

Overall, the investment trust is directing its exposure to “investments which will benefit from the impact of new technologies, and Far Eastern markets, influenced by the growing demand from Asian consumers,” according to Lord Rothschild. 

Not cheap 

Unfortuntately, because RIT has generated such impressive returns for investors during the past decade, shares in the trust are not cheap. At the time of writing the shares are changing hands at 1,941p, a premium of 8.8% to net asset value. After increasing its interim dividend payout by 3.2% today, RIT is on track to pay out 32p per share to investors for the full-year, giving a dividend yield of 1.6%. 

Still, even though it is trading at a premium to net asset value, if the firm can continue to produce double-digit returns for investors every year, this is one company that you can rely on to increase your wealth. 

Undervalued 

Alliance Trust (LSE: ATST) might be a better choice than RIT if you’re looking for a trust that’s trading at a discount. It has struggled over the past few years, which has resulted in investors avoiding the firm, but a recent shake-up has put an end to the poor investment performance. 

Alliance Trust reported a net asset value total return of 12.4% over the six months to June 30. This compares with a 6.4% return from the MSCI All Country World Index over the same period. The better performance, coupled with the trust’s restructuring has sent its shares higher by 22% excluding dividends over the past year, and there could be further gains ahead. 

Based on the most recent figures, Alliance’s net asset value per share is just under 749p, 4.6% above the current price of 417p. Management has instigated a stock buyback to try and reduce this discount. The shares support a dividend yield of around 1.8%. 

The post Could these investment trusts help to you achieve financial independence? appeared first on The Motley Fool UK.

More reading

• 161 years of dividend growth! 3 investment trusts for passive income

Rupert Hargreaves has no position in any 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.

Do the RIT thing

The £2.9 billion trust is renowned for its strong long-term performance, which continues in its 2016 results, published today. RIT Capital Partners posted a 12.1% rise in net asset value over the year, with a total share price return of 14.2%. The board also signalled its intention to pay a dividend of 32p per share in 2017, an increase of 3.2% over the previous year. However, with a yield of just 1.64%, this more of a growth than an income play.

It doesn’t aim to be a shoot-the-lights out fund, but performance has still been pretty rip-roaring. It is up 73% over the past five years, according to Trustnet.com, against 25% on the FTSE 100 and 33% on its benchmark index. That is impressive, given that it also aims to sell shelter some of its capital from market vicissitudes, which might normally act as a drag on growth. RIT Capital has now participated in 75% of market upside but only 39% of market declines.

Capital idea

By limiting its losses in tough times, RIT Capital Partners has less ground to make up when markets recover, and the fund has delivered a compounded total shareholder return of 12.9% a year since launch in 1988, easily thrashing its benchmark, which returned 6.8%. But it can still put on a show in the good times, for example, over the past 12 months it is up 24%, against 18% for the FTSE 100 and 20% for its benchmark.

This multi-asset international fund is not constrained by a formal benchmark but is free to invest in any global asset classes, with the aim of combining long-term growth with capital protection. It invests in public equity, private investments and a range of specialist external funds, such as the Eisler Capital Fund, BlackRock Frontiers and Martin Currie Japan.

Perfect partner

I owned the shares myself some years ago, with great joy, but that was in the days when I used to chop and change my portfolio, rather than buy and hold for the long term. Otherwise I would still hold it, and it would be one of the best performing funds in my possession.

The trust’s strategy looks particularly attractive in today’s market. Right now it is adopting a more cautious stance, trimming equity exposure, cutting allocation to sterling, shorting government bonds to get exposure to higher inflation, and balancing stock market exposure with absolute return strategies.

RIT Capital Partners has become a victim of its success, as it is currently trading at a whopping premium to net asset value of 7.93%. That is tribute to the respect investors have for this fund. You could wait for that premium to narrow but you might have to be very, very patient. Have you got the RIT stuff?

The post The RIT stuff: why I’d buy RIT Capital Partners plc after FY results appeared first on The Motley Fool UK.

More reading

• This value stock could turn £2k into £2,860 this year
• Thank goodness I didn’t buy Greggs shares in 2025
• Legal & General shares: still seen as a dividend stock — but that may be outdated
• 13,000 more reasons why I’m avoiding IAG shares!
• This FTSE 250 stock fell by over 3% after solid earnings. Should investors consider buying it?

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.