Take the following trusts: Allianz Technology Trust (LSE:ATT), HgCapital Trust (LSE:HGT), and JP Morgan American Investment Trust (LSE:JAM). These products have delivered a stunning average annual return of 13.7% over the past decade.

For a modest management fee, investors have tapped into the experience of seasoned fund managers to realise those decent profit. And they’ve got exposure to thousands of different global shares without having to pay a transaction fee for each one.

Here’s why I think these top investment trusts should continue delivering exceptional returns.

Tech titan

Allianz Technology Trust has harnessed the enormous growth potential of US tech shares to brilliant effect. Since 2015, it’s delivered an average annual return of 9.7%.

Fears over Magnificent Seven shares like Nvidia, Amazon, and Microsoft abound due to their elevated valuations. This could prompt a pullback, but I think they’ll continue rising strongly over the long term as our lives become increasingly digitalised.

With 51 different holdings, the Allianz Technology Trust provides multiple ways to capitalise on the tech revolution. So if artificial intelligence (AI), for instance, fails to live up to its early promise, segments like cybersecurity, cloud computing, and robotics could still lift the trust to the stars.

Targeting hard-to-reach places

The HgCapital Trust gives investors access to companies that aren’t listed on stock exchanges. These number 57 in total across the software and services sectors. Since the mid-2010s, it’s provided an average annual return of 16.4%.

The companies it holds enjoy recurring revenues and high margins, and are spread across many industries including tax and accounting, payroll, fintech, insurance, and healthcare. This, along with a wide reach across Europe and North America provides excellent diversification.

I expect HgCapital to continue outperforming, though the cyclical nature of its holdings could leave it vulnerable to temporary economic downturns.

Big US returns

The US stock market has been a formidable cash generator over the long term. Since 2015, it’s driven a 15.1% average annual return for the JP Morgan American Investment Trust, with its laser focus on Wall Street equities.

With a high weighting of technology shares, the trust has considerable long-term growth potential, as that whopping return indicates. Just under 30% is locked up in these high-performing shares.

Other well represented sectors include financial services, telecoms, healthcare, and discretionary consumer goods. In total, it holds shares in more than 250 multinational companies, providing excellent growth and income opportunities alongside diversification for safety.

Investor rotation out of US shares may dent JP Morgan American’s returns. But on balance, I’m expecting it to enjoy another strong decade.

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A whopping four-in-10 of us are under-saving for retirement, according to the Department for Work and Pensions (DWP). That’s based on the target replacement rate (TRR), which is the proportion of pre-retirement earnings (averaged between age 50 and State Pension Age) “an individual would need to replace to meet an adequate income in retirement, as set out in the Turner Commission.” That’s assumes individuals will convert the full value of their defined contribution pension pot into an annuity.

That equates to 14.6m people with not enough in their retirement pots.

Another DWP projection shows just one-in-four adults are on course to a ‘comfortable’ retirement, as described by Pensions UK. This would mean annual incomes of around £43,900 for a single-person household, and £60,600 for a couple.

As I’ve said, we’re still in the middle of a cost-of-living crisis. This makes saving for retirement tougher than usual. Yet even those saving below the national average can build a sizeable pension over time.

How much is needed each month?

According to Shepherds Friendly, the average amount people have to save or invest each month is £514. If they can harness the full power of the stock market, and are willing reinvest dividends for the full compounding effect, that’s a decent wad of cash to put to work.

I think a 9% average rate of return is achievable (but not guaranteed) with a diversified portfolio of global shares. Based on that, someone who invests for 30 years could have built up a pension pot of £457,686.

If invested in 7%-yielding dividend shares, that would then mean an annual second income of £32,038. Added to the full State Pension, which is currently £11,900 and likely to rise over time, I believe our investor would have achieved more than what Pensions UK deems necessary for a single person to achieve a ‘comfortable’ retirement.

However, that’s not based on that £514 I mentioned above. Our calculation is based on a £250 monthly investment, less than half that amount. It underlines the incredible wealth-building potential of the stock market.

Targeting a large passive income

This is why I invest most of my extra cash each month in global stocks in a Self-Invested Personal Pension (SIPP) and Stocks and Shares ISA.

We don’t need to put in the time and effort of picking individual shares to make a large return either. A trust like the JPMorgan American Investment Trust (LSE:JAM) uses the expertise of seasoned fund managers to help investors build a large retirement pot.

As its name implies, this particular investment trust holds a basket of US shares (276 in all). These are spread across many industries, reducing risk and offering exposure to a range of growth and income possibilities.

Its focus on Wall Street equities means greater geographic risk than more globally-allocated trusts. But it also allows it to harness the long-term strength of the US stock market.

Since 2015, the JPMorgan American Investment Trust has delivered an average annual return of 16%. That’s far above the 9% our investor in the example above is targeting. And if it continues, someone investing £250 a month could create a significantly larger portfolio over 30 years (one worth a stunning £2.2m, in fact).

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That’s because many shares now look seriously overvalued, particularly across the pond. Artificial intelligence (AI) stocks have led the charge, but there’s growing chatter that the rally’s running out of steam. Even Wall Street royalty’s getting twitchy.

What’s the worry?

Earlier this year, JP Morgan Chase CEO Jamie Dimon – a man who doesn’t exactly throw around words like ‘crash’ lightly – voiced concern about rising inflation and economic drag. His fear? That tariffs, debt and tightening financial conditions could choke off growth.

He’s not alone. Several top investors have been quietly trimming positions, nervous that the post-Covid boom might be on borrowed time. And with US trade tensions heating up again – particularly with China and Europe – the road ahead could get bumpy.

Meanwhile, the AI boom, which has fuelled huge gains in 2023 and 2024, is starting to wobble. Not that I think AI’s going away but the hype cycle might be peaking, and if that bubble bursts, some stocks could tumble fast.

So what can investors do?

Preparation’s key and one option is to try to pick the winners and dodge the flops. But timing the market is notoriously difficult and one bad trade can wipe out years of careful planning. During market dips, certain sectors can suffer more than others, so having investments spread over multiple areas can help reduce risk.

That’s why cautious investors may want to consider a diversified tech-focused investment trust like JP Morgan American Investment Trust (LSE: JAM).

This fund’s quietly doubled in value over the past five years, rising 113% and outperforming the S&P 500 in the process. The ongoing charge is a modest 0.35%, and gearing is a fairly conservative 5%, meaning it’s not overexposed to risk.

JAM’s top holdings read like a Silicon Valley who’s who: Amazon, Microsoft, Nvidia, Apple, Broadcom, Meta. All the big hitters, neatly wrapped into a single trust.

Its sector breakdown is tech-heavy (28%), but also includes finance (18.5%), consumer cyclical (15%), healthcare (10%), and industrials (10%). That kind of spread helps cushion the blow if one area takes a hit.

Any downsides?

However, almost all of the fund’s assets are in North America, with less than 0.1% elsewhere. That kind of regional concentration carries risk, especially if US markets hit a wall. And while its tech focus is a strength during a boom, it could be a weakness in a slump.

Still, compared to betting the house on a single frothy AI stock, it offers far more stability.

Nobody knows for sure when the next stock market crash will hit but signs are mounting that caution’s warranted. Spreading investments across diversified funds like this could be one way to weather the storm while still maintaining exposure to growth.

In uncertain times, a bit of balance can go a long way.

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Data from money comparison website Moneyfacts shows why. Over the last 10 years, the average annual return on a Stocks and Shares ISA has been an impressive 9.64%. By comparison, the yearly average on Cash ISAs sits way back at 1.21%.

That’s not to say that savings accounts don’t play an important role. I personally use one to balance risk in my portfolio and to hold money for a rainy day. But the vast majority of my capital is tied up in shares, funds, and trusts.

This way, I think I have a much better chance of hitting my retirement goals.

A clear path

Let’s say someone invested £400 a month in a Stocks and Shares ISA and another £100 in a Cash ISA. If those rate of returns of the past decade remained unchanged, after 30 years our investor would have a portfolio of £880,996 to fund their retirement.

They could then use that money to buy an annuity, purchase dividend shares, or make a regular drawdown for a healthy passive income.

If they chose to put the full £500 monthly sum into a Cash ISA instead, they’d have made just £216,879 over the same timeframe to retire on. I doubt this would give them anywhere near the £43,100 that the Pension and Lifetime Savings Association (PLSA) says that single people need to retire on each year.

As I’ve already alluded to, investing in shares involves more danger than parking one’s cash in a savings account. However, by investing in a range of different stocks, individuals can reduce the risk they face while still targeting strong portfolio growth.

275 shares for a winning ISA

Stocks and Shares ISA holders can easily and cheaply build a diversified portfolio with an investment trust or exchange-traded fund (ETF). These pooled investments often hold dozens, or hundreds, or even thousands of assets to capture different investment opportunities and spread risk.

The JP Morgan American Investment Trust (LSE:JAM) is one such vehicle I think demands serious consideration. With an average annualised return of 14.48% since 2015, shareholder gains here have outstripped what the average Stocks and Shares ISA investor has enjoyed over that timeframe.

In total, this trust has holdings in 275 different US equities spread across both cyclical and defensive sectors. This gives it strength throughout the economic cycle. What’s more, around 93% of its capital is tied up in large-cap companies (those with market caps of £10bn and more), giving investors large exposure to robust, market-leading companies with cash-rich balance sheets.

Major holdings here include Microsoft, Amazon, Berkshire Hathaway, Nvidia, and Mastercard.

While reducing risk, this investment trust doesn’t eliminate danger entirely. For instance, returns here could disappoint looking ahead if economic conditions in the US worsen and/or global trade tensions worsen.

But, in my opinion, the long-term resilience of the US stock market means this trust still merits serious consideration from ISA investors.

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There’s no denying Rolls’ shares have been on an absolute tear. They’re up almost 500% in the past two years, far outperforming any other stock on the FTSE 100. But growth like that is seldom rational or sustainable.

As it continues to skyrocket, the chance of a correction becomes more and more likely.

Upcoming results

Next Thursday (27 February), Rolls will announce its full-year results for 2024. It’s expected to achieve underlying operation profit ranging £2.1bn-£2.3bn, with free cash flow of £2.1bn-£2.2bn. It also plans to reinstate dividends, starting with a payout ratio of 30% of profit after tax.

All that is great and if it comes to pass, the stock could climb even further.

The risk is that if it fails to meet those expectations, investors could be spooked and the stock could take a dive. With limited new buyers left to prop up the price, the losses could be significant. That’s maybe why analysts are increasingly bearish, with an average 12-month price target of 632p — 1.4% down from today’s price. 

A more reliable, low-risk option?

Don’t get me wrong, Rolls is a great company that’s in a great position to keep performing well. But historically, its price has been volatile and is currently in a precarious position.

When thinking long-term, I find consistent and sustainable growth more attractive. For that, investors may want to consider JPMorgan American Investment Trust (LSE: JAM), a US-focused trust that’s delivered consistent returns for decades.

Since 2005, the share price has grown at an annualised rate of 12% a year. At the same time, Rolls has grown at an annualised rate of 10% a year. And since the JPMorgan trust is highly diversified and less prone to volatility, I’m more confident it could maintain that growth.

Stability through diversity

The fund’s top holdings are unsurprisingly dominated by US tech stocks. In fact, 25% of the fund is made up of just five stocks: Amazon, Microsoft, Meta, Nvidia and Apple.

Further down are some finance stocks like Capital One, Berkshire and Loews. All told, the portfolio’s made up of 283 holdings from around the world, spanning 11 different sectors. The level of diversification helps to ensure stable growth with low volatility.

Over the past three, five and 10 years, the fund’s annualised share price growth has consistently outperformed its net asset value (NAV).

Risks to consider

When looking at any stock, it’s important to consider the risks. While this trust has generally favourable reviews, that alone doesn’t mean it’s a good buy. When it comes to investment trusts, the risks tend to be related to how the portfolio’s balanced and managed.

Since JPMorgan American’s heavily weighted towards US stocks, an economic downturn in the States would affect it. In the same vein, any currency fluctuations between the US and the UK could have an impact on returns.

Despite these risks, I would be surprised if it underperformed Rolls-Royce over the next five years.

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1. Use an ISA or SIPP

Over time, share investors can lose huge portions of their earnings through capital gains tax (CGT) and/or dividend tax. The good news is that two financial products — the Individual Savings Account (ISA) and the Self-Invested Personal Pension (SIPP) — exist that can eliminate these costs.

In recent years, dividend tax allowances have fallen sharply and are now just £500. Any dividend income after this is subject to tax.

And things are going to get much worse on the CGT front. For the 2025/2026 tax year, basic- and higher-rate taxpayers will see tax rates jump from 10% and 20%, to 18% and 24%, respectively.

Unsurprisingly, ISAs and SIPPS are soaring in popularity as UK tax rules become harsher.

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. Reduce trading fees

Fierce competition among product providers gives investors a chance to keep costs down. However, the differences in fees can differ greatly among brokerages. So it’s important that the broker an individual chooses is the most cost-effective for their needs.

Like tax, excessive broker charges can seriously eat into eventual returns.

Hargreaves Lansdown, for instance, charges up to £11.95 per share trade, though this drops after 10 trades. AJ Bell‘s fees, meanwhile, are either £5 or £3.50 each, also depending on the number of monthly trades.

Investors need to consider carefully the best broker for their investing style and needs. But it’s not all about cost. Some may be happy to pay more for extra services.

3. Invest wisely

When it comes to actually choosing shares, there’s no ‘one size fits all’ approach. The contents of each of our portfolios will depend on our individual investment goals and risk tolerance.

But there are some universal rules to consider when building an ISA or SIPP. These include:

• Buying stocks across multiple industries and regions to spread risk.
• Investing in value, growth, and dividend shares for a smooth return across the economic cycle.
• Ignoring short-term noise and investing for the long term (a favourite tactic of Warren Buffett).
• Reinvesting any dividends for large compound gains.

Investing in trusts can be a great way to achieve some or all of these goals. The JP Morgan American Investment Trust (LSE:JAM), to name just one popular trust, is one that’s delivered great returns over time.

This trust owns shares in almost 300 companies across various industries, with major holdings including Nvidia, Amazon, McDonald’s, Mastercard, and Berkshire Hathaway.

This provides excellent diversification and at little cost, too, compared to buying individual shares, which would incur multiple trading fees.

As its name implies, the trust provides targeted exposure to the US. This may leave it at a disadvantage to more global-orientated funds if America’s economy struggles.

But so far this hasn’t proved a roadblock for stunning returns. It’s delivered an average annual return of 16.19% since 2014.

An £88k passive income

Past performance is no guarantee of future returns. But a £250 monthly investment in this trust would — if its strong momentum continues — deliver a £2,198,961 pension pot after 30 years (excluding fees).

This would then deliver an annual passive income of almost £88k (£87,958), based on an annual drawdown rate of 4%.

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Being a mature adult with no savings isn’t a position that any of us want to be in. Yet it’s a reality for some, even at 40, through no fault of their own. If I was in that position right now and wanted to start to build wealth for retirement, I have a couple of FTSE 250 stocks that would be on my radar to consider buying.

To allow me to have the funds to purchase the stocks, I’d first look to cut back on my spending or boost my income. This would leave me with excess funds at the end of each month that I can use to invest.

Doing the simple things well

First up is Hill & Smith (LSE:HILS). It might not be the superstar tech stock that’s in the news all the time, but I like it for different reasons.

The business designs, manufactures and supplies products for the construction and infrastructure industries. The firm is focused mainly on operations in the UK, USA, India and Australia.

I like the stock as one to hold through to retirement as it operates in a sector that should have perpetual demand. What I mean by this is that there’s a constant need for everything from road safety barriers to steel chains. Therefore, the products that the firm sells will always be needed in the future for basic functions. This should mean that it can continue to be profitable (and have a healthy share price) for a long time.

Further, it appeals to me due to its long-term share price growth. A decade ago the stock was trading around 500p. It’s now at 1,850p. Yet the share price isn’t showing signs of slowing down. Over the past year, the stock is up 36%.

A risk is that the firm needs to manage acquisitions carefully. It has snapped up three businesses within the past year. They need to be integrated carefully to ensure that spending isn’t wasted and overly time-consuming.

Across the pond

Next I like the JP Morgan American Investment Trust (LSE:JAM). The recent outperformance of the US stock market has attracted a lot of attention from this side of the pond.

The trust is a nice way to get exposure to US stocks without me having to be an expert. Further, I feel it’s a bit generic to simply buy the major US tech firms. To generate real outperformance relative to the index, I need to have exposure to other companies.

This is what the trust does. Although it still owns major firms like Nvidia and Apple, some of the top holdings also include Loews Corp and Regeneron Pharmaceuticals.

When I’m thinking about stocks to hold to retirement, the trust is an easy way to have some exposure to the US without me having to work too hard in researching individual names.

Over the past year, the stock is up 33%. A definite risk is that the US market could be starting to become a bubble. If we see a sharp correction lower over the next year, I could be kicking myself for buying when I did.

The post With no savings at 40, I’d buy and hold these 2 FTSE 250 stocks to retirement appeared first on The Motley Fool UK.

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.

Investment trusts are a great way to gain exposure to a wide range of diversified shares, particularly US tech stocks. The following three investment trusts have outperformed the S&P 500 in recent years, so I think they would be worth considering for an ISA in 2024.

The AI-focused high-flyer

Polar Capital Technology Trust (LSE:PCT) has risen 126% in the past five years — far higher than the S&P 500’s 79% gains. The trust recently pivoted towards the burgeoning artificial intelligence (AI) market, helping to boost its value. Investments in AI-reliant semiconductor stocks like Rambus and automation software like Synopsys have helped drive up its share price. Closer to home, it’s diversified into promising LSE-listed biotech firm Oxford Nanopore Technologies. 

However, it’s still heavily weighted towards US tech stocks, with approximately one-third of its portfolio invested in Nvidia, Microsoft, Meta, Apple and AMD. This leaves it overly exposed to downturns in the US economy and underexposed to any upticks in the Asia Pacific region. Still, the promising future of AI makes me feel this stock could perform well long term.

An American equity-focused trust

Managed by experts at one of the largest financial institutions in the US, the JPMorgan American Investment Trust (LSE:JAM) is up 123% in the past five years. It includes a mix of growth and value stocks of companies with strong financials and solid balance sheets. With a 26% focus on tech, it also includes more diverse shares like Berkshire Hathaway, Mastercard, and Loews Corp.

However, the index could be affected by an economic downturn in the short term. A renewed likelihood of rate cut delays in the US due to unexpected job growth shook markets recently. Analysts fear this could lead to subdued US market performance in the second half of the year. Major tech stocks like Nvidia and AMD closed down last week.

In the long term though, I feel a JPMorgan-run trust is an investment I could rely on. 

Top tech stock exposure

Allianz Technology Trust (LSE: ATT) is a great fund for those keen to gain exposure to the booming US tech industry. It’s headquartered in the heart of the action, Silicon Valley, where top tech firms like Apple and Google operate. The Allianz team brings a wealth of knowledge and experience to the fund, helping to craft a careful balance of the best-performing stocks at any time. The fund offsets mega-cap leaders like Nvidia and Microsoft with smaller upstarts like Monolithic Power Systems.

Up 120% in five years, the trust appears to have reliable growth potential. However, with a heavy weighting towards tech stocks, it’s vulnerable to the type of sudden price movements these stocks are prone to. In the first half of 2022, it fell 42% when US tech stocks plunged. This makes it prone to short-term volatility. However, in the long term, tech isn’t going anywhere and I think this trust can continue to grow.

The post Beating the S&P 500! I’d consider these 3 investment trusts for a Stocks and Shares ISA in 2024 appeared first on The Motley Fool UK.

Here, I’m going to highlight three investment trusts that have delivered great returns in recent years. I think they could be worth considering as part of a diversified ISA portfolio.

Easy access to tech stocks

First up is the Allianz Technology Trust (LSE: ATT), a niche trust that’s focused on technology stocks.

It’s managed by the highly experienced AllianzGI Global Technology team, which is based near Silicon Valley (where many of the world’s top tech companies are located).

One reason I like this trust is that it provides exposure to a broad mix of tech businesses. Not only does it hold mega-cap tech giants such as Microsoft and Nvidia but it also holds less well known companies such as cybersecurity specialist CrowdStrike and chip manufacturing equipment maker Lam Research.

While this trust has delivered outstanding long-term returns (for the five-year period to the end of January its share price rose 135%), it does carry a higher level of risk than a broad global equity trust. If tech stocks experience a short-term pullback (and they often do), it’s likely to underperform.

Taking a long-term view however, I think it’s likely to do well. Looking ahead, the world is only going to become more digital.

Beating the S&P 500

Next, we have JPMorgan American (LSE: JAM). This is a US equity-focused trust managed by experts at financial services powerhouse JPMorgan.

It aims to generate capital growth by investing in high-quality businesses with good management and strong balance sheets.

What I like about this trust is that it has exposure to both growth and value stocks. This means it has the potential to outperform in different market conditions.

Performance has certainly been strong lately. For the five-year period to the end of January, the trust’s share price rose 128% – miles ahead of the S&P 500 index’s return of 99%.

Of course, the risk here is that the US market – which has been strong in recent years – could experience a period of underperformance. This is something to consider.

In the long run however, I think the US market is likely to keep delivering strong returns. After all, it’s currently home to many of the world’s most dominant companies.

Europe’s best companies

Finally, we have the BlackRock Greater Europe Investment Trust (LSE: BRGE). This is another growth focused product.

However, its focus is on Europe (including the UK). European equities are often ignored by UK investors. And I think that’s a shame. While the region may not have the same track record as the US, it is home to some fantastic companies including the likes of diabetes drug specialist Novo Nordisk, semiconductor manufacturing equipment maker ASML, and luxury goods giant LVMH (all of which are in this trust).

One downside to this product is that its ongoing charges are 0.98% a year. That’s quite a high fee for an investment trust.

However, given that the trust has returned about 100% over the last five years (to 28 February), versus around 62% for its benchmark (the FTSE World Europe ex UK Index), I can justify the charges here.

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