M&G (LSE:MNG), Alliance Witan (LSE:ALW) and Lion Finance (LSE:BGEO) are three that have caught my attention today. Want to know what I think makes them genuine bargains to consider rather than value traps? Read on.

8% dividend yield!

Recent share price weakness has propelled M&G’s dividend yield for this year back above 7%, to 7.7%. For 2027, the yield moves to 8%. This makes it one of the FTSE 100’s most irresistible dividend stocks and high on my watchlist for when I have cash to invest.

The firm’s fallen in value as the Iran war has worsened inflationary pressures. If the conflict persists, consumer spending on discretionary financial products could drop. However, I’d still consider buying M&G shares — the long-term outlook remains robust as ever, with demographic changes tipped to drive rapid market growth.

M&G’s leading sector position puts it in great shape to supercharge earnings in this landscape. In the meantime, I expect the firm to keep paying enormous dividends, supported by its cash-rich balance sheet.

Top trust

At £12.20 per share, Alliance Witan’s dividend yield has risen to 2.4%, the highest in about a year. That’s not groundbreaking — the average yield on FTSE 100 stocks sits higher than this at 3.2%.

However, it’s an added sweetener for an investment trust that’s already looking cheap. Today it trades at a 6.1% discount to its net asset value (NAV) per share.

Like other shares-based trusts, Alliance Witan’s dropped amid broader stock market volatility. It might do again. But longer term, I’m expecting it to keep delivering juicy rewards. The average annual return here has averaged 10% over the last five years.

This reflects the trust’s huge portfolio of quality stocks. With holdings in 227 global shares spanning industries and regions, it allows investors to effectively spread risk and capture a multitude of opportunities.

Growth and dividends

Lion Finance is one of the FTSE’s most exciting bank shares in my view. It only entered the blue-chip index in late March. Like HSBC, it harnesses the enormous growth potential of emerging markets.

In this case, the company (formerly known as Bank of Georgia) provides banking services to Georgians and Armenians. Profits have grown rapidly for years, as rapid economic growth has turbocharged boosted personal wealth levels. The bank’s underlying profits soared 28% year on year in 2025.

Can it keep delivering these sort of stunning numbers, though? An extended Middle East conflict could hit earnings if regional and global growth cools. However, I think this is more than reflected in Lion’s rock-bottom valuation.

The forward P/E ratio is 5.6 times. A 3.8% dividend yield provided a tasty bonus. I’m optimistic the bank will keep going from strength to strength.

The post Looking for FTSE 100 bargain stocks? Check these out! appeared first on The Motley Fool UK.

Does this mean we need to buy shares before this date? Not at all. Investors can just deposit their cash if they want to and look for stocks to buy later on. ISAs can hold shares, trusts and funds from across the globe.

This doesn’t mean they have to wait, of course. In fact, those who delay may miss out on some top bargains. Here are two cut-price FTSE 100 shares I think deserve serious consideration today.

Alliance Witan

Shares in investment trust Alliance Witan (LSE:ALW) are trading at a handy discount today. At £12.86 per share, they’re around 6% cheaper than the trust’s net asset value (NAV) per share.

What makes it worth considering today? Since early 2021, it’s delivered an average annual return of 10.1%. Pooled investments like this let investors target big gains while simultaneously managing risk in an effective manner. Alliance Witan’s £5.4bn portfolio is spread across 233 global companies, which limits drag on overall performance if a handful of stocks struggle.

I especially like the high concentration of tech stocks. Companies like Nvidia, Microsoft and Apple allow it to target high-growth industries like cybersecurity, cloud computing, autonomous vehicles and artificial intelligence (AI). But be mindful that this focus could also leave the trust vulnerable if fears over an AI bubble grow.

Fresnillo

Fresnillo (LSE:FRES) has an enormous chance to surge again as precious metals prices recover. I don’t think this is reflected in the gold and silver miner’s £44.50 share price.

City analysts think the Mexican miner’s earnings will soar 87% year on year in 2026. And so it changes hands on a forward price-to-earnings growth (PEG) ratio of 0.2. A reminder than any sub-1 reading indicates a share that’s trading below value.

Precious metals prices have been volatile in recent weeks. They could remain so if gold and silver investors continue booking profits after recent strong gains. However, I believe the safe-haven commodities will hit new record highs sooner rather than later, driven by interest rate cuts, growing geopolitical uncertainty and a falling US dollar.

A wide range of analysts share my positive take. JP Morgan boffins for instance reckon gold will reach $6,300 an ounce by the end of 2026. That’s up from $5,240 today. This sort of scenario would likely pull Fresnillo’s share price skywards again, unless operational issues kick in that hamper production. The FTSE 100 firm’s risen 470% in value over the last 12 months.

The post Looking for FTSE 100 bargains before the ISA deadline? Here are 2 to consider appeared first on The Motley Fool UK.

Sure, stock markets can be volatile at times. But over time, few asset classes have provided the brilliant and reliable returns of global shares. Consider the wise words of billionaire investor Warren Buffett. The now-retired Berkshire Hathaway CEO famously pointed out that

in the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

Have £500 to invest each month? Here’s how ISA investors could target a comfortable lifestyle in retirement.

Building wealth, limiting risk

With the Stocks and Shares ISA, individuals are protected from all sorts of tax. It’s the same with the Cash ISA. As a result, people have a better chance of building wealth before retirement with these wrappers, as they end up with more cash to invest and compound over time. And once retired, they don’t have to pay a penny in income tax when they draw down money.

Add in the high long-term performance of the stock market, and these products can generate truly life-changing returns.

Since 2015, the average Stocks and Shares ISA holder has enjoyed an average yearly return of 9.64%, according to Moneyfacts. For Cash ISA savers, the figure sits way back at 1.21%. I think a blend of both could be a great way to balance chasing large returns with limiting risk.

A £70k passive income

Let’s say an investor has £500 left over at the end of each month. They choose to split that 80-20, with the former used to buy shares and the rest held in cash.

We’ll also say they can achieve the returns ISA investors have enjoyed over the last decade. After 30 years, they would have £880,996 to retire on.

If then invested in 8%-yielding dividend shares, they’d enjoy a juicy £70,479 annual passive income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A world of opportunity

What I also love about the Stocks and Shares ISA is its versatility. With these products, investors can hold a wide range of shares, trusts, and funds to help them diversify, providing protection from risk and unlocking many growth and income opportunities.

Alliance Witan (LSE:ALW) is a top investment trust to consider in an ISA, in my view. It might be listed on the FTSE 100, but it holds a diversified portfolio of global stocks (224 to be exact). These include high-growth US tech stocks like Nvidia, Microsoft, and Apple alongside miners, banks, drugmakers, and other shares from across the world.

The trust has risen 157% in value over the past 10 years. It has also kept growing a dividend that has risen every year since the late 1960s. As a consequence, it has produced an average yearly return of 11.4% since 2015. That’s better than the 9.64% that the typical ISA investor has enjoyed!

Alliance Witan might drop in value during a broader stock market downturn. But longer term, I’m confident it will keep delivering returns that could fund a very comfortable retirement.

The post Could buying global shares in an ISA be the key to retiring rich? appeared first on The Motley Fool UK.

Investors don’t just tend to capture superior dividend yields compared with overseas shares. They can also enjoy spectacular payout growth as earnings on many UK blue-chip stocks explode.

Coca-Cola Europacific Partners (LSE:CCEP), Alliance Witan (LSE:ALW), and BAE Systems (LSE:BA.) are three top dividend growth shares I’m considering. Want to know why?

Fizzy growth

Coca-Cola Europacific Partners has tapped strong emerging market growth to boost dividends. They rose 7% in 2024, and City analysts expect similar increases this year and next.

This leaves dividend yields of 2.7% and 3% respectively.

Coca-Cola’s other advantage is brand strength. Demand for its heavyweight labels like Coke remains high across the economic cycle. Exceptional brand power also enables it to effectively raise prices, giving earnings an additional boost.

Combined, they mean the company can be relied upon to consistently increase dividends.

That said, the company isn’t immune to shocks. In 2020, dividends fell as pandemic lockdowns hit drinks sales in pubs and restaurants. But barring some once-in-a-generation catastrophe, I’m expecting the drinks bottler to keep raising dividends for the foreseeable future.

Top trust

Investment trusts like Alliance Witan can be among the most durable dividend stocks out there. By holding a diversified basket of shares, they spread risk across regions and sectors, providing a reliable passive income stream.

This FTSE trust has one of the greatest dividend growth records out there. Cash rewards have risen for 58 straight years.

Alliance Witan’s portfolio today suggests it’s in great shape to keep this record going. It owns 224 shares in total, covering dozens of industries including financial services, information technology, healthcare, and mining.

The dividend for 2025 is tipped to rise 6%, resulting in a 2.2% dividend yield. Be mindful that dividends on equity-based trusts are less predictable than ones that hold fixed-income securities like bonds.

Defence dividends

BAE Systems has one of the best dividend growth records on the FTSE. Not only have they grown consistently each year for over two decades, they’ve also risen at a robust 8% since 2020.

Can they continue at this pace? I’m confident they will, even though high competition and supply chain problems could hamper earnings.

BAE’s market-leading positions mean sales are booming as Western nations rapidly rearm, driving earnings skywards. It’s a trend that’s set to continue — NATO chief Mark Rutte said just this week that members “must be prepared for the scale of war our grandparents and great-grandparents endured” following Russia’s invasion of Ukraine.

City analysts share my bullish take. They expect dividends on BAE Systems shares to rise 8% and 11% in 2025 and 2026 respectively.

This leaves yields of 2.1% and 2.4%.

The post 3 dynamite dividend growth stocks from the FTSE 100! appeared first on The Motley Fool UK.

Experts at interactive investor have said that “the chancellor [is] believed to be eyeing up a reduction to either £10,000 or £12,000, akin to the pre-2014 ISA landscape when the cash limit was never more than half the overall allowance.“

That would mark a significant reduction from the current limit of £20,000.

But I’m not panicking. In fact, any changes to the ISA allowance won’t change my wealth-building strategy in the slightest. Want to know why?

Protecting my future

Put simply, cash products don’t play a big role in my strategy to build long-term wealth.

Sure, I use a Cash ISA to hold emergency cash and to diversify my holdings. However, the terrible returns they provide mean the bulk of my capital is invested in shares, trusts and funds, which provide far higher returns.

So even if the Cash ISA allowance is slashed to £10k or £12k, it won’t make any difference to my investing strategy. Putting too much money in a low-yielding Cash ISA could have catastrophic consequences on my retirement plans.

Let me show you why.

Different ISA returns

Over the last decade, the typical Cash ISA saver has ‘enjoyed’ an average annual return of 1.2%. That’s substantially below the average of 9.6% that Stocks and Shares ISA investors have tended to receive. This is according to research from Moneyfacts.

Based on those figures, someone who saved £500 a month in a Cash ISA would have £135,548 after 20 years.

For someone who split £100 between a Cash ISA and £400 in an investing ISA? The total return is more than double that, at £315,562.

Balancing risk and reward

The possibility of higher returns comes with greater risk, naturally. However, with the right investments it’s possible to create a rock-solid Stocks and Shares ISA.

I myself have reduced the risk to my cash by diversifying my portfolio. This includes investing in a wide range of individual stocks in both cyclical and defensive sectors (think utilities, healthcare providers and food manufacturers).

I also hold money in investment trusts and exchange-traded funds (ETFs). These products can spread investors across hundreds of shares, based on particular themes or indexes.

I think Alliance Witan (LSE:ALW) is a great trust for risk-averse individuals to consider. Since late 2020, it’s delivered an average yearly return of 12.2%, helped by its long record of rising dividends. Dividends here have risen consistently for 58 years.

The trust’s performance is sensitive to broader stock market conditions. As seen in early 2025, its share price fell heavily as global equity values fell.

But the trust’s capital allocation means it’s still provided market-beating returns over the longer term. Today it holds shares in 227 different companies: these are as varied as US chipbuilder Nvidia, French defence stock Safran, British drinks manufacturer Diageo and Korea’s Samsung Electronics.

Considering diversified trusts like this can help Britons earn great returns without having to accept excessive risk. In my opinion, they’re a far better way to target long-term wealth than simply bunging cash in an ISA.

The post Here’s what I’ll do to stay ahead if ISA rules change in this Autumn Budget! appeared first on The Motley Fool UK.

With this in mind, here are three FTSE 100 dividend shares to consider as dangers to the global economy grow.

SSE

Utilities are among the most secure passive income payers in tough times. Take SSE (LSE:SSE) as an example.

People and businesses don’t suddenly stop using electricity when economic crises come along. Kettles still need boiling, lights turning on and electric cars charging. So these companies’ revenues and cash flows remain broadly stable from year to year, providing the lifeblood for steady dividends.

SSE does have notable debt that investors should consider. But with its net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) ratio of four times, my view is that its balance sheet is in decent shape.

There is some risk here, in that SSE prioritises wind power above other sources. This creates the danger of poor power generation in calm conditions. But on balance, I think it’s an attractive lifeboat in turbulent times.

The forward dividend yield is a healthy 3.8%.

Alliance Witan

Investment trust Alliance Witan (LSE:ALW) has the strongest dividend growth record on the FTSE 100 index. Shareholder payouts have grown for 58 straight years, through financial system crashes, pandemics, and wars.

This reflects the trust’s diversified portfolio, which spans different regions and industries, including defence sectors like utilities, healthcare, and consumer staples. It’s a quality that reduces risk across the portfolio and helps smooth out dividend volatility.

Alliance Witan’s brilliant dividend stability also reflects its ability to retain earnings during good years. As an investment trust, it’s permitted to hold back up to 15% a year, which it can draw upon for dividends in tougher times.

Its large weighting of global shares leaves it vulnerable to currency risk. But I still believe the trust (which yields 2.3%) is worth serious attention.

Segro

Real estate investment trusts (REITs) can also be rock-solid dividend stocks during market crashes.

Whatever the weather, they must pay 90% of annual earnings from their rental operations to shareholders. That’s in exchange for juicy tax advantages.

Rent collection and occupancy issues can still spring up, though, to impact profits and by extension dividends. But Segro‘s (LSE:SGRO) large and diversified portfolio spanning several European countries and almost 1,400 tenants helps spread the risk.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

What’s more, Segro has its tenants locked down on long, multi-year contracts, providing excellent earnings visibility across the economic cycle. It has a weighted average unexpired lease term (WAULT) of 7.1 years to break, and 8.2 years to expiry.

The REIT has raised dividends for the last 11 years on the spin. Its forward dividend yield is 4.7%.

The post Worried about a crash? 3 rock-solid FTSE 100 dividend stocks to consider appeared first on The Motley Fool UK.

In fact, as of October, 23 stocks in the FTSE 350 have increased their payouts for more than 25 years in a row.

Among these lucrative passive income-generating stocks are:

• Alliance Witan (LSE:ALW)
• DCC
• Halma
• Scottish Mortgage Investment Trust
• British American Tobacco

So for income investors with a nice £5,000 lump sum, are these stocks no-brainer buys in 2025?

Digging deeper

Let’s zoom in on Alliance Witan. The UK-based investment trust uses a multi-manager strategy to target long-term diversified growth in the equity markets.

That does result in the business being highly sensitive to the fluctuations of the stock market and global economies. But despite this risk factor, the leadership’s ability to identify top-tier managers has enabled the business to navigate even the worst market crashes and corrections without compromising dividends.

As a result, the stock’s approaching 59 years of continuous dividend hikes – an impressive feat. Providing that trend continues, today’s modest 2.2% yield could expand significantly. And it’s a similar story to the other businesses on this list.

Looking at the group’s financials and portfolio positioning, most analysts remain optimistic that dividends will continue to climb. That’s because the firm operates with relatively low levels of financial leverage. And its diversity of managers and strategies means that performance is less exposed to style-specific and industry-specific risk factors.

So far, this all sounds rather promising.

There’s always risk

As impressive as Alliance Witan’s performance has been, there are a few weak spots to consider. Its diversified investing approach has resulted in relatively low exposure to the US tech sector, including the ‘Magnificent 7’.

Since these stocks have been driving the bulk of US stock market returns in recent years, the firm’s performance has actually lagged some key benchmarks, such as the MSCI All-Country World Index.

• Chart comparison

In other words, while dividends shine, capital gains have struggled to keep up, and that pattern may continue if global equities continue to lag US tech stocks. This is especially true given that combative trade policies from the US could result in further pressure on global stocks, particularly within emerging markets.

Even the pattern shifts, as previously mentioned, as an equity investment business, it remains highly exposed to macroeconomic risk factors like inflation and geopolitical developments.

The bottom line

Maintaining such a long track record of hiking dividends is no easy feat. And it certainly signals strong long-term sustainability. However, as with all investments, there are always risks and threats that can derail even the strongest-looking businesses.

• Scottish Mortgage is exposed to similar macroeconomic fluctuations as Alliance Witan
• British American Tobacco’s tackling a challenging long-term transition away from cigarettes
• Halma’s acquisition-led strategies create significant execution and integration risk
• DCC’s navigating complicated regulatory shifts within the energy sector, applying pressure to margins

So should investors blindly invest £5,000 in these income stocks? Of course not.

Given their impressive track records, I think these businesses are definitely worth investigating further. But it’s critical to always carefully examine both the risks and potential rewards of even the most promising-looking opportunities.

The post 5 no-brainer income stocks with 25+ years of dividend growth to buy with £5,000? appeared first on The Motley Fool UK.

Here are three steps that ISA users can take to help substantially grow their wealth.

1. Set clear goals

Before filling up a Stocks and Shares ISA, it’s critical to consider what you’re trying to achieve. This will influence every facet of an investing strategy.

Someone looking to build a retirement fund is likely to have time on their side. As a consequence, they might want to consider prioritising growth stocks, which, while volatile, can deliver exceptional long-term returns.

Conversely, an individual who’s seeking to fund their child’s education may have less than a decade to build their ISA. In this instance, they may want to balance riskier, high-growth shares with more defensive stocks like utilities. They may also want to hold some money back in a Cash ISA.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

2. Be patient

We all love the idea of getting rich overnight. But taking a ‘Hail Mary’ approach with high-risk assets rarely works. In fact, it can leave individuals nursing a large hole in their pockets.

In reality, discipline, patience, and a measured risk-reward strategy tend to be the most powerful weapons for targeting life-changing returns.

Charlie Munger, who was right-hand man to Warren Buffett for 45 years, said, “the big money is not in the buying or the selling, but in the waiting“. With this approach, investors can let the power of time and compound returns do the heavy lifting for them.

A £20,000 lump sum investment might not seem much. But left to compound at an annual rate of 9%, a modest nest egg like this could eventually turn into almost £300,000 after 30 years.

3. Build a diversified ISA

ISA investors have thousands of shares, investment trusts, and funds from across the globe they can buy to target strong returns. It can pay to take full advantage of this.

Having a diversified portfolio provides exposure to a wide range of growth and income opportunities. It also helps individuals reduce risk. I personally like the idea of having an ISA of at least 20-25 stocks whose operations span industries and regions.

This can be done by buying individual shares, though trusts like Alliance Witan (LSE:ALW) can also be used to effectively diversify.

This FTSE 100-listed investment trust relies on a team of 11 fund managers to select a maximum of 20 shares. This provides a wide range of perspectives that draws on decades of investing expertise.

Today, Alliance Witan holds shares in 223 different companies spanning a range of sectors and covering all four corners of the globe:

Its portfolio is packed with multinational companies, offering further strength. And many of these are tech giants like Microsoft and Nvidia, which — although leaving the trust vulnerable to economic slowdowns — opens the door to significant long-term returns as the digital economy explodes.

Alliance Witan has delivered an average annual return of 11.6% since 2015. If this continues, which of course is not guaranteed, it could go a long way to helping an ISA investor generate substantial wealth.

The post 3 simple steps to grow your wealth with ISAs appeared first on The Motley Fool UK.

Here are three top picks that I think are worth further research.

Growth share exposure

Polar Capital Technology Trust (LSE:PCT) has been one of the London stock market’s top three best-performing trusts since August 2020, delivering an average annual return of 12.2%.

Given its focus on growth stocks, this perhaps isn’t a surprise — technology shares continue to rocket in value as the digital revolution rolls on.

Nvidia‘s surge to become the first $4trn company last month highlights the enormous growth potential of the tech sector. Microsoft has since matched that milestone too.

These two market leaders are Polar Capital Technology Trust’s biggest holdings (11.6% and 8.1% of the total portfolio, respectively). Other notable tech giants among its 97 holdings include Apple, Meta, Alphabet and Taiwan Semiconductor.

With its focus on growth shares, the trust is in danger of underperforming during economic downturns. Yet I think the long-term potential here — driven by trends like artificial intelligence (AI), cloud computing and robotics — is hard to ignore.

Today it trades at an 8.9% discount to its net asset value (NAV) per share.

Great for dividends

With interest rates receding, real estate investment trusts like Supermarket Income REIT (LSE:SUPR) are becoming increasingly attractive to me.

There’s no guarantee the Bank of England will continue slashing rates, however. So the risk to the property stock’s NAVs remain. But with inflation falling and the UK economy struggling, I’m confident rates will keep falling.

Supermarket Income’s an especially attractive REIT in my opinion. Its focus on the highly stable food retail market means rental income remains stable even if economic conditions remain tough.

Additionally, it’s shaped its portfolio around blue-chip tenants like Tesco, Sainsbury’s, Aldi and Waitrose, reducing the chances of rent collection and occupancy issues still further. FTSE 100 operators Tesco and Sainsbury’s alone account for 74% of total rental income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Trusts like this can be especially lucrative for investors seeking passive income. In exchange for tax perks, REITs have to pay at least nine-tenths of profits from their rental operations out in dividends.

The forward dividend yield at Supermarket Income is 7.6%.

FTSE 100 star

Following its merger with Witan Investment Trust in late 2024, Alliance Witan (LSE:ALW) is the FTSE 100’s second-largest investment trust. It’s been going strong since 1888 and has total assets of £5.4bn.

What I like about this one is the exceptional diversification it provides. As well as holding a large collection of US tech stocks, it provides significant exposure to other sectors like financial services, consumer goods, telecoms and industrials.

Other major holdings include Visa, Netflix, Diageo and Airbus. In total, the trust owns shares in 226 global companies.

Like other equity-focused funds, Alliance Witan is vulnerable to broader falls in investor confidence. But over time it’s proved its ability to bounce back and then some — its average annual return since August 2020 is 11.7%.

Past performance is no guarantee of future returns though, but I still think this one can continue to outperform.

The post 3 top FTSE 100 and FTSE 250 investment trusts to consider buying today! appeared first on The Motley Fool UK.

According to the Office for National Statistics (ONS), the average 40-year-old in the UK has only around £40,000 set aside for retirement. For those with no plan or savings at all, it might look especially daunting.

The good news? Even starting at 40, there’s still time to put together a realistic strategy.

How to aim for £1k a month

A common rule of thumb is withdrawing 4% of an investment pot annually. To target £12,000 a year – or £1,000 a month – an investor would need roughly £300,000 in a Stocks and Shares ISA or a Self-Invested Personal Pension (SIPP).

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

If someone already has the average £40,000, they could reach that target in around 29 years based on a market average 7% annual return. 

However, for those with no savings, significant monthly contributions would be required. By investing £300 a month from age 40, it would take about 28 years to grow the pot to £300,000 (assuming the same 7% return). Bumping monthly contributions to £360 would reduce the timeframe to 25 years, aligning with a traditional retirement at 65.

Of course, £360 a month is a meaningful sum. But with tax relief on pension contributions, or the dividend and capital gains tax advantages of an ISA, it’s achievable for many households.

What could achieve a 7% return?

A simple FTSE 100 tracker might do the job. Historically, the index has delivered around 7% a year over the long term, including dividends. But heavy concentration in a single market carries its own risk. Many investors prefer to diversify across geographies and sectors. 

A convenient option to consider is a multi-asset investment trust like Alliance Witan (LSE: ALW). This global investment trust holds assets spread across the US, UK, Europe and Asia. It holds everything from S&P 500 giants like Microsoft, Amazon and Visa to FTSE 100 defensive stalwarts such as Diageo and Unilever. It also dips into technology, healthcare, financials and industrials, offering built-in diversification.

Performance has been impressive. Over the past decade, Witan’s returned 155% – that’s an annualised 9.8%, comfortably exceeding the rough 7% target. Valuation looks appealing too. It trades on a low price-to-earnings (P/E) ratio of 8. On top of that, it offers a modest dividend yield of 2.13%, with an eight-year record of continuous growth. Dividends have increased 6% annually, supported by a very safe payout ratio of just 16.9%.

But like many investment trusts, Alliance Witan often trades at a discount to the value of its underlying assets. While this can offer a bargain, that discount can also widen in times of market stress or if investor sentiment sours, which could magnify losses. Investors might not just suffer from falling asset values — they could also see the stock trade at an even deeper discount, hitting the share price harder.

Still time…

Passive income might feel out of reach at 40 with little saved. But with sensible contributions into an ISA and a diversified growth-focused trust like Witan, building a £1,000 monthly second income is still a realistic goal. 

For investors planning for retirement, it’s a trust worth a closer look.

The post 40 with no retirement plan? This much in an ISA could target a £1,000 monthly passive income appeared first on The Motley Fool UK.