Some of the wild and wonderful ideas I’ve seen recently include holiday lets, online courses, app design, and vending machines. I don’t know about you, but the hard work that’s involved in many of these schemes don’t exactly seem passive to me. It’s why I’ve sought to target a dividend income by buying shares, trusts and funds in my 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.

A simpler journey

I’m not saying share investing doesn’t require any effort. It’s important to devise a strategy and to properly research any assets you plan to buy before handing over any cash.

Yet after this initial legwork, only a little effort is typically needed to grow and tailor the portfolio over time.

Also, the beauty of a Stocks and Shares ISA is protection from both capital gains tax and dividend tax. The same can’t be said for those other passive income methods I’ve mentioned, for which most people would owe a portion of their earnings to HMRC.

Top trust

I also like the ISA method because individuals can buy assets that reduce any upfront work they need to do. I’m talking about investment trusts more specifically. These financial instruments hold assets like equities, bonds, and commodities, and are professionally managed by fund managers.

The JP Morgan Global Growth & Income (LSE:JGGI) trust is one such investment vehicle that stands out to me. Past performance isn’t always a reliable guide to the future. But its 14.4% average annual return over the last decade demands serious attention, in my book.

To put that in context, the broader FTSE 100‘s delivered an 8% comparable return over the period.

A few reasons why I like this JP Morgan trust include:

• Its holds a large contingent of US tech shares with high growth characteristics
• The fund owns shares in 63 global companies, which protects returns from individual company shocks
• These holdings are well diversified by region and industry, reducing risk further and providing exposure to different growth and income opportunities
• It is run by three fund managers with a combined 75 years of industry experience

Like any investment, the JP Morgan Global Growth & Income fund isn’t without risk. In this case, its focus on equities leaves it vulnerable to any broader stock market downturn. But I still think it’s worth serious consideration, and am optimistic it could deliver substantial ISA growth and eventually a large passive income.

Generating a £52k income

Let’s say an investor has £500 a month to invest in a Stocks & Shares ISA. If they can achieve an average 8% annual return across all their investments, they would — after 30 years — have a portfolio worth £745,180.

They could then use this to target an annual income of £52,163 by investing in 7%-yielding dividend shares. All this underlines the wealth-growing power of the stock market and the enormous tax benefits of the ISA.

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With this in mind, here are two top, balanced trusts worth serious consideration right now.

Global dividend trust

Through a combination of share price gains and dividend income, the Bankers Investment Trust (LSE:BNKR) has delivered an average annual return of 11% over the last 10 years.

To put that into context, the FTSE 100‘s delivered a 7% return on the same basis. The FTSE 250 index of mid-cap growth shares produced a 5% average return.

Bankers could be an especially great trust to consider for investors leaning more closely towards dividends. It targets payout growth “greater than inflation, as measured by the UK Consumer Prices Index“, and has raised cash rewards for 58 consecutive years.

The trust’s portfolio comprises roughly 100 global shares, and has significant holdings in technology shares such as Microsoft, Amazon, Apple and Alphabet.

This provides significant growth potential as the digital economy rapidly grows. In total, around 32% of the fund is tied up in tech stocks. But remember that this high weighting could cause Bankers to underperform during economic slowdowns.

High yield growth trust

The JP Morgan Global Growth & Income (LSE:JGGI) trust has performed even more strongly over the last decade. Since summer 2015, it’s provided an average annual return of 17.1%.

As a consequence, it’s comfortably achieved its goal of providing better returns than the MSCI All Country World Index. The total return here sits way back at 10.5%.

This JP Morgan investment trust doesn’t have the stunning dividend growth record of Bankers. Cash rewards fell sharply in 2016 after it reset its payout policy, reflecting plans to deliver dividends totalling 4% of its net asset value (NAV).

But dividends have grown strongly since then, and the revised policy means the trust beats most UK shares on yield.

Like Bankers, it holds a high proportion of US tech shares. This leaves it vulnerable to a slowing global economy, as well as a prolonged market shift from Wall Street equities to non-US stocks.

UK dividend trust

City of London Investment Trust (LSE:CTY) has also raised dividends consistently for more than half a century. They’ve grown every year since 1966, to be exact.

Combined with share price gains, this means over the last decade the trust’s delivered an average annual of 10.6%. I strongly believe returns could substantially improve over the next 10 years as broader demand for UK shares continues to pick up.

You see, City of London is focused on blue-chip companies from Britain’s stock market. These make up around 93% of the entire portfolio, in fact, with major holdings including HSBC, BAE Systems, Shell and Lloyds.

This geographic allocation creates more regional risk than those other global trusts I’ve described. But it also provides the potential for greater returns if the recent shift from US equities to UK stocks continues.

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With a £500 monthly investment, here’s how an investor could generate a healthy passive income in retirement.

A £50k passive income

As I mentioned, the returns enjoyed by Stocks and Shares ISA investors can be considerable. At 9.64%, the average yearly return for the last 10 years trumps the 1.21% return that the Cash ISAs provided. That’s according to price comparison website Moneyfacts.

Accordingly, prioritising investment in one of these riskier products could be the most effective way to build enough wealth for a comfortable retirement. Of course, Cash ISAs can also play a vital role in wealth creation by reducing risk and providing a stable return across the economic cycle.

Let’s consider how someone with £500 to invest each month could make it work. How much they split between share investing and cash will involve a delicate balance between their long-term goals and their attitude to risk. In this case, let’s say they prefer a 75/25 split that might deliver solid growth while also providing a safety net.

If they can match the averages of the last decade, they would — after 30 years — have:

• £785,269 in their Stocks and Shares ISA
• £54,220 in their Cash ISA

This would give them a combined retirement portfolio of £839,489 they could use for a passive income. With this money, they could purchase dividend shares, which should give them a steady flow of income. It would also give them a chance to continue growing their portfolio.

If they bought shares yielding 6%, they’d have £50,369 to live on each year from their portfolio. Combined with the State Pension, this could give them a bountiful total retirement income.

A top trust

Investment trusts like the JPMorgan Global Growth & Income (LSE:JGGI) product can be great ways to build wealth with a Stocks and Shares ISA.

Thise diversified approach provides a way to target capital gains and passive income in a way that effectively spreads risk. The JPMorgan vehicle’s aim is to hold between 50 and 90 companies at any one time, across a spectrum of industries and regions:

Through the use of gearing (borrowed funds) — which today stands at 1.85% of shareholders’ capital — the trust’s managers can also better capitalise on investing opportunities as they arise.

Like other equity-based investment trusts, JPMorgan’s product can still fall during broader stock market downturns despite its diversified approach. Its use of gearing may also present higher risk. But I think its long-term record speaks for itself.

Delivering an average annualised return of 12.8% since 2015, it’s proved a great way for UK investors to build wealth for retirement.

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The FTSE 100 share

Investing in companies whose revenues are government-backed can be dicey business. But while some areas of public expenditure can be prone to savage cuts, defence tends to be more robust, and especially in the current geopolitical climate.

This is what makes BAE Systems (LSE:BA.) a solid selection for capital gains and dividends, in my book. Indeed, shareholder dividends here have risen every year since 2011.

This FTSE 100 company’s more robust than many too. It’s a market leader across a range of technologies, giving it robust relationships with governments across the world. Its order backlog was a record £77.8bn at the end of 2024.

Reduced military expenditure from the US poses a risk going forward. However, this may be offset by soaring defence spending from other NATO members. There’s also the possibility of accelerating sales from other regions like Saudi Arabia and India.

The trust

The JPMorgan Global Growth & Income (LSE:JGGI) investment trust helps investors chase returns using a diversified approach. Spreading risk doesn’t necessarily feed through to lower gains as this financial vehicle shows — it’s delivered an average annual return of 12.8% since 2015.

In terms of dividends, this pooled instrument aims to pay a sum equivalent to at least 4% of the previous year’s total net asset value (NAV).

In total, the trust holds between 50 and 90 different companies from across the globe at any one time. At the moment, these range from the ‘Magificent Seven’ tech stocks such as Nvidia and Microsoft, to luxury goods group LVMH, defence business Safran, and food and drink producer Nestlé.

This in turn helps it absorb shocks in particular industries and geographies, and the ability to provide a smooth return across the economic cycle.

Investors need to consider JPMorgan trust’s use of borrowed funds however. As it mentions on its factsheet: “Gearing may magnify gains or losses” depending on market movements.

The FTSE 250 stock

Supported by the cash cow that is the Harry Potter franchise, Bloomsbury Publishing (LSE:BMY) has one of the FTSE 250‘s greatest dividend records.

Up until the Covid-19 crisis, cash rewards had risen for 24 consecutive years. Since then, dividends have resumed with a bang, and in the year to February 2024 it raised the payout 25%. Another hefty hike is tipped for financial 2025 when results are released on Thursday (22 May).

Bloomsbury doesn’t just rely on the student wizard to drive profits either. It has a packed stable of fantasy fiction winners from popular authors including Sarah J Maas. And it’s making huge strides in the academic publishing field to supplement its heavyweight consumer division.

There’s no guarantee the company can keep delivering bestsellers, of course. Bad reviews and significant competition are just a couple of threats it faces. But I feel it may have the strength in depth to overcome future disappointments and still deliver great returns.

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JPMorgan Global Growth & Income

The JPMorgan Global Growth & Income (LSE:JGGI) trust does exactly what it says on the label. It invests in a variety of global stocks — typically in a range of 50 to 90 — to drive capital appreciation and generate a decent dividend income.

Last year, the trust raised the annual dividend 23.6%, a rise helped by its large distributable cash reserves.

As with many pooled investments, it has significant holdings in US tech stocks to attain growth. Microsoft, Amazon, Nvidia, and Meta are (in order) its four largest holdings. In total, just over a quarter of its capital is spread across semiconductor manufacturers, software developers, and hardware makers.

But unlike some trusts, this JP Morgan one uses borrowed funds to strive for superior gains. While the presence of gearing like this can amplify investor earnings, it can also exacerbate losses if the trust underperforms.

BlackRock World Mining Trust

The BlackRock World Mining Trust (LSE:BRWM) provides investors with a more targeted approach. In this case, it’s designed to generate a profit as commodities demand steadily grows.

That said, the trust’s exposure to the mining sector is spread far and wide. Approximately 60% is invested in mining companies with global operations, a quality that helps it absorb upheaval (like political instability and conflict) in certain regions. Multinational operators BHP, Rio Tinto, and Glencore are some of the largest of its 60-plus holdings.

In addition, this BlackRock product provides exposure to a range of industrial and precious metals including copper, iron ore, and gold. As a consequence, investors can enjoy a multitude of growth opportunities as well as a stable return across the economic cycle.

The trust could be a great way to capitalise on long-term themes like rising digitalisation, the growth of clean energy, and ongoing urbanisation. However, volatility on commodity markets could impact investor returns from year to year.

Alliance Witan

Alliance Witan (LSE:ALW) is one of the world’s oldest investment trusts. And for dividend hunters, it might be one of the best to consider.

It’s raised the annual dividend for 57 years on the spin.

This is another pooled vehicle with significant holdings in tech giants like Alphabet and Nvidia. But with weighty exposure to other sectors like financials, consumer goods, healthcare, and telecoms, it also holds a number of companies known for paying large and growing dividends.

Famous dividend payers in its portfolio include Unilever, Philip Morris, and Coca-Cola.

In total, the trust has holdings in around 200 companies from across the world. And so it provides superior diversification than many other investment products. But be aware that its high exposure to cyclical industries could still result in poor returns during economic downturns.

The post 3 investment trusts to consider in 2025 for growth and passive income! appeared first on The Motley Fool UK.

Here, I’m going to highlight three investment trusts that have excellent track records. I think they could be worth considering as part of a diversified SIPP portfolio.

Outstanding performance

First up is JP Morgan Global Growth & Income (LSE: JGGI). This is a global equity product that’s managed by banking powerhouse JP Morgan. Its aim is to combine the best ideas from the company’s global investment platform with an innovative dividend policy to deliver both gains and income.

This trust has delivered outstanding performance of late. For the five-year period to the end of 2023, for example, its share price rose 112.7% (versus 73.9% for its benchmark).

What I like about this trust is that it’s not an ‘index hugger’. Within the top 10 holdings, there are quite a few stocks that won’t be found in the top 10 holdings of a global tracker fund, such as drinks giant Coca-Cola and chip manufacturing equipment maker ASML.

Of course, this stock-picking approach could backfire. However, I’m encouraged by the excellent long-term track record here. For the 10-year period to the end of 2023, the trust beat its benchmark by about 90%.

Ongoing charges are 0.5%.

10 professional stock pickers

Next, we have Alliance Trust (LSE: ATST). Now, this trust is a little different. That’s because its investment manager, Willis Towers Watson, has appointed 10 different professional investors – all with different styles – to pick shares for the portfolio.

This unique approach seems to be working. For the five years to the end of 2023, the trust delivered a total shareholder return of 79.3% versus 73.9% for the MSCI ACWI index.

I really like the portfolio here. At the end of 2023, the top 10 holdings included names such as Microsoft, Amazon, and Nvidia. In today’s digital world, these companies are just going from strength to strength.

It’s worth noting that this trust does have a large weighting to the US, which adds some risk.

I actually think this geographic tilt is smart though. Today, the US is home to many of the world’s most dominant businesses.

Ongoing charges are 0.61% a year.

A dividend hero

Finally, I want to highlight the Brunner Investment Trust (LSE: BUT).

This is a diversified product that invests in both UK and global equities and aims to provide growth and income.

This trust has a great track record on the growth front. For the five years to the end of 2023, its share price rose 93.5%.

It also has an excellent track record on the dividend front. Believe it or not, it has increased its dividend every year for over 50 years now (meaning it’s classified as a ‘Dividend Hero’).

It’s worth pointing out that this trust does have quite a bit of exposure to cyclical areas of the market like industrial and financial companies. This adds some risk.

Overall though, I think there’s a lot to like about it.

Ongoing charges are 0.63%.

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Investment trusts are a great way to invest in the market quickly. They are actively managed investment companies that own portfolios of stocks.

This means it’s easy to buy one company and get exposure to a whole basket of different stocks spread across sectors and industries.

Buying trusts also enables investors to buy exposure to sectors or regions they may not necessarily be able to invest in themselves. 

Investment trusts to buy 

I think one stock market sector that will do well over the next few decades no matter what happens to the global economy is healthcare. According to current projections, global healthcare spending could hit $10trn by 2022, up from around $8trn in 2018. 

The US is by far the world’s largest market for healthcare spending, and this is where some of the best businesses are located. That’s why I’d buy the Worldwide Healthcare Trust (LSE: WWH) for a small portfolio of investment trusts. I already own this stock in my portfolio for the same reasons.  

This trust, as its name suggests, can invest all over the world. US stocks make up two-thirds of the portfolio, and 11% is in Chinese equities. The rest is spread around the world. The largest holding is Boston Scientific.

As well as its international diversification, the trust is also managed by a specialist healthcare investment manager, which can bring levels of experience to the table that I could not. 

The international diversification and specialist experience are the two reasons I would buy this for my portfolio of investment trusts. 

This approach might not be suitable for all investors because it requires a level of trust in the investment manager. If the investment manager makes poor investment decisions, the returns of the trust could suffer. Some investors may not be comfortable with this approach. 

Global growth 

The other firm I’d buy for my portfolio of investment trusts is JPMorgan Global Growth and Income (LSE: JGGI). 

Once again, this is a trust I already own and would happily buy more of.

JPMorgan’s offering invests in stocks around the world that its managers believe can generate outstanding performance. Its track record of finding these businesses is pretty good. Over the past five years, the stock has returned 118%. Its top holding at present is Google’s parent company, Alphabet. 

However, it does command a performance fee. Its managers are paid a performance fee of 15% if the trust outperforms its benchmark index. High-performance fees can eat away at returns, so many investors might not be comfortable owning the trust as a result. 

Still, I’m happy to pay managers a performance fee if they continue to achieve outstanding returns. As well as capital growth, the stock also supports a dividend yield of 3.2% at present. That’s why I’d buy this stock for my portfolio of investment trusts with £2k today. 

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Going for growth

These three aim to deliver a combination of growth and income, to build your wealth while working and deliver income after you have stopped.

Perhaps the most exciting is JP Morgan Global Growth & Income (LSE: JPGI), the best performer on the Global Growth & Income sector measured over 10 years, up 257% in that time, and also over five years, when it returned 91%, according to Citywire. Past performance is no guarantee of future success, but management is clearly doing something right.

Income for sale

This £425m global fund was launched in December 1964 and aims to outperform the MSCI All Country World Index over the long-term with a high conviction portfolio of typically 50-90 stocks, built through research-driven bottom-up stock picking.

The trust aims to pay dividends totalling at least 4% of its net asset value each quarter, and currently yields a generous 3.68%. It trades at a small premium of 0.95%, which is a sign of a fund in demand. Check its top holdings against your own portfolio for clashes: 4.6% of the fund is in Google-owner Alphabet, with other US stocks Microsoft, United Health Group, Pioneer Natural Resources, Union Pacific, Citigroup and Visa figuring strongly.

Global reach

My next tip is another global trust, Invesco Perpetual Select Trust Global Equity Income (LSE: IVPG). Again, it aims to deliver long-term income and capital growth through a globally diversified portfolio of stocks. Launched in 2006 this is a smaller fund with just £68m under management but is another top performer returning 187% over 10 years, and 72% over five.

This is around 35% invested in Europe and also the US, with 18% in the UK, and the remainder in Asia-Pacific and Japan. The top three holdings are Royal Dutch Shell, Chevron and BP, and with Total at number six you are getting plenty of oil exposure. Orange, Pfizer and Nasdaq also feature in the top 10. This offers an attractive yield of 3.25% and trades at a slight discount of -1.08,

Premium fund

Finally, the Scottish play. Although actually, Scottish American Investment Company (LSE: SCAM), managed by Baillie Gifford, is another global fund and this one comes with a truly long-term pedigree, having been launched way back in 1873. Founder William Menzies thought he could offer a better income than the “pitifully low” 3.5% offered by the Bank of England at the time. Now it pays just 3%, although of course these are strange times.

The trust is up 154% over 10 years, and 64% over five. It  also has large exposure to Europe, around 36%, with a smaller US focus at 24%, and a spread of Asia-Pacific and international equities. Top holdings include Deutsche Boerse, Coca-Cola, Johnson & Johnson, Prudential, Hiscox and Microsoft. This is the largest trust of the three with £525m under management. It trades at a premium of 2.02.

Funds like these could even make you a millionaire. There is some crossover, so you may want to pick your favourite and match them with others. Then sit back and let the growth and income flow.

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