However, investors could have done far better with an investment trust that’s a constituent of the index. Over the last decade, this particular product has returned about 25% per year.

A brilliant long-term investment

The one I’m referring to is the Polar Capital Technology Trust (LSE: PCT). This is a tech stock-focused product run by London-based investment manager firm Polar Capital.

A decade ago, it was trading for around 55p. Today however, it has a share price of around 503p.

That means anyone who bought 10 years ago and held for the long term has made around nine times their money. That’s an absolutely brilliant return – it could have turned a £5,000 investment into around £45,000.

Worth a look in 2026?

Is this trust worth considering today? I think so.

The table below shows the top 10 holdings at the end of 2025. What I like about that list is that there’s a lot of exposure to chip (Nvidia, Broadcom, AMD, TSMC) and chip manufacturing equipment stocks (Lam Research, KLA).

I reckon these stocks will do well in the years ahead. They should benefit as companies like Amazon, Alphabet, and Meta spend heavily on AI infrastructure and the world becomes more digital.

Digging deeper into the holdings, there were some really interesting names in the portfolio at the end of October (the latest full portfolio holdings data available). Some examples here include taser maker Axon Enterprise, AI powerhouse Palantir, data centre cooling specialist Vertiv, and fast-growing investment platform Robinhood Markets.

Of course, there’s a chance that these names have been sold since the end of October. But it shows you the types of innovative companies in the portfolio.

One other thing to like about this trust is that it currently trades at a near-10% discount to its net asset value (NAV). In other words, anyone buying now is getting access to a basket of high-quality tech stocks at a significant discount.

Risks and fees

Of course, there are plenty of risks to consider with this product. One is the sector focus.

While the portfolio is well diversified at stock level, it’s not very diversified at sector level (although there are a few stocks in the portfolio that aren’t pure tech stocks). So, if the tech sector was to have a meltdown (or even just go nowhere), this trust would most likely underperform.

The significant exposure to chips is another risk to consider. This area of technology has historically been volatile.

In terms of fees, ongoing charges are 0.77%. That’s relatively high.

There are some other products in this space that have lower fees. An example here is the iShares S&P 500 Information Technology Sector UCITS ETF (its fees are just 0.15%).

Overall though, I see quite a bit of appeal in this product. I believe it’s worth considering for a diversified portfolio.

The post £1,000 buys 198 shares in this FTSE 100 investment trust that’s returned 25% a year for the last 10 years appeared first on The Motley Fool UK.

FTSE 100-listed Vodafone (LSE:VOD) is one I’ve noted. And from the FTSE 250, Polar Capital Technology Trust (LSE:PCT) and QinetiQ (LSE:QQ.) are another two bargains that have caught my eye.

Can investors afford to pass them up? Here’s why I think they’re top value stocks to consider.

A cheap investment trust

Fears of a potential ‘AI bubble’ have driven shares in Polar Capital Technology Trust sharply lower of late. This isn’t much of a surprise given the investment trust’s large holdings in AI stocks like Nvidia, Meta Platforms, and Microsoft.

For investors who reject the bubble narrative, I think this could represent an attractive dip-buying opportunity. The trust currently trades at a 12% discount to net asset value (NAV) per share around 512p.

I like the broad range of tech shares that Polar Capital Technology contains (93 in total). This provides exposure to an array of white-hot growth segments, including AI, cybersecurity, robotics, biotechnology, and cloud and quantum computing.

Such diversification also helps protect investors against risk. Over five years, the trust’s enjoyed a total return north of 700%. I think it can keep delivering over the long term.

Defence bargain

QinetiQ’s plummeted in value during Q4, leaving it (in my opinion) one of the UK’s best-value defence shares.

Its forward price-to-earnings (P/E) ratio is a sector-leading 13.4 times. Meanwhile, its P/E-to-growth (PEG) sits at just 0.8. Any sub-1 reading indicates a share that’s trading below value.

QinetiQ’s slump is especially surprising to me given recent trading news. It remains firmly in recovery after fixes to its US business, and order intake more than doubled in the six months to September (£2.4bn).

A possible peace deal between Ukraine and Russia represents a natural threat. But in the broader geopolitical landscape, I’m expecting the company’s shares to rise strongly over time.

A FTSE value star

Vodafone’s not without its challenges. Its turnaround in Germany is likely to be a lumpy process given high competitive pressures. It also faces large ongoing capex charges that could dent earnings.

I believe these problems are more than reflected in Vodafone’s rock-bottom share price, though. Its price-to-book (P/B) ratio is 0.5 times, even after recent price gains.

Meanwhile, the company’s forward P/E ratio is 13.2 times. That’s far below the 10-year average of 17.7.

I think there’s good reason to expect Vodafone shares to continue their 2025 rebound. Progress in its core German market, allied with a tighter grip on costs show a company clearly moving in the right direction. Last month it raised profit guidance and tipped adjusted EBITDA at the upper end of a €11.3bn to €11.6bn range.

I think Vodafone can rise steadily as telecoms demand gradually rises, with particular strength expected in the cheap share’s African markets.

The post Can investors afford to miss these 3 dirt-cheap UK shares? appeared first on The Motley Fool UK.

Still, being prepared can’t hurt. And in some cases, it can turn a potential catastrophe into an opportunity.

Will the market crash?

Last week, the FTSE 100 suffered one of its sharpest dips in months, falling 3% in less than 48 hours. That’s concerning, but understanding why markets crash can help alleviate the worry. 

Sometimes they’re the result of a natural disaster, like the pandemic, but more often they’re simply a healthy correction. And as history shows, they don’t last forever.

The recent rallies in the US and UK mimic similar ones that preceded corrections, so it wouldn’t be unusual for another to occur soon.

To prepare, I’ve been rebalancing into defensive shares as they tend to weather market downturns better. But I’ve also been doing something else.

Saving for a shopping spree

Are there any stocks you want to buy, but they’re just too expensive? Well, a stock market crash could be an early Christmas self-gifting opportunity.

The trick is having cash on hand to avoid selling other stocks at a loss to finance new investments. But it’s important not to dive in immediately — market dips can drag on longer than expected, and in a recession that cash may be a much-needed lifeline.

Once things have stabilised and a recovery’s in sight, then consider where opportunities lie. Not every stock will necessarily recover, so it’s still critical to carefully assess each option.

One stock I’ve got my eye on is Polar Capital Technology (LSE: PCT), a trust that invests in US tech stocks like Nvidia, Microsoft and Meta. With the US tech sector looking particularly wobbly, the trust could take quite a dip if things go south.

The £4.58 share price is by no means unaffordable, but currently looks heavily overvalued, with a price-to-earnings (P/E) ratio of 49.2. I think it has a lot of potential, but I don’t want to pay that premium — it could severely limit my future returns.

If a crash brought the P/E ratio below 20, the growth potential could be significant. However, its heavy concentration in US tech is also an ongoing risk, not to mention its reliance on the fund management team’s continued good judgment.

For now, I think they’re doing great, so I plan to buy the stock if the valuation drops.

The bottom line

In most cases, a stock market crash is nothing more than normal, cyclical behaviour. Seasoned investors not only expect them, they actually look forward to them as opportunities.

While nobody knows exactly when they will occur, it pays to keep an eye on valuation metrics. Higher-than-average P/E ratios across the board are a common precursor.

Rebalancing from high-growth stocks into defensive shares can soften volatility, while having cash on hand means you’re ready to take advantage of lower prices.

The post Stock market crash? More like stock market cash! appeared first on The Motley Fool UK.

On the one hand, the index’s rise is mighty impressive given market concerns about growth-crushing trade tariffs and rising inflation. There’s a good chance it will keep storming higher, too, given the enduring cheapness of UK mid-cap shares.

But can we expect the FTSE 250 index to hit new record highs any time soon? I asked ChatGPT for the answer, and here’s what it said.

What next?

At roughly 22,023 points, the UK’s mid-tier share index is roughly 9% below its record closing highs of 24,250.80 in September 2021. Given its strong recent momentum, a blast to fresh peaks could be possible in 2026 or 2027.

But what does ChatGPT think?

I asked it “when will the FTSE 250 hit new record highs?” Unfortunately — but unsurprisingly — it didn’t give me an answer. It said that “no one can say for sure when the index will reach a new record“.

But it did provide some insight into what might happen, commenting that

The FTSE 250 could hit a new record if the UK economy accelerates, interest rates drop, and investor sentiment shifts into domestic/mid‑cap stocks.

ChatGPT reassuringly added that “it’s not a question of ‘if’ it hits new highs in the long‑term, but more ‘when and under what conditions”.

The AI model added, however, that “given current headwinds (moderating UK growth, higher interest rates, and global macro uncertainty), its rise may be delayed“.

Thinking long term

ChatGPT ticked all of the main boxes on what could drive (or drag on) the index, but it won’t be winning any awards for its answers any time soon. They’re the sort of boilerplate statements that analysts, economists, and market commentators have been making for decades.

Predicting the near-term movements of stock markets is notoriously difficult. But as the AI said, the historical direction for the FTSE 250 is up. So it pays to take a long-term view when choosing stocks to buy, and to ignore any noise on possible short-term shifts.

A top UK share

Polar Capital Technology Trust (LSE:PCT) is one such stock I think investors need to consider. This investment trust has risen 40% over the last year, far ahead of the broader mid-cap index.

Over the last 10 years, its total return is 22.2%. Again, that’s higher that the overall index’s return (5.5%).

The breakneck returns reflect the trust’s focus on high-growth tech stocks. In total, it holds 92 (mainly US) shares, allowing it to capture the full might of the digital revolution. Explosive segments like AI, quantum computing, robotics, and autonomous vehicles are all well represented.

What’s more, Polar Capital Technology concentrates on market leaders with strong records of innovation and deep pockets. Right now, Nvidia, Microsoft, and Meta stock represent its three largest holdings.

Returns may come in lower during economic downturns when tech-related spending dips. But over the long term, I think the trust will continue to be an excellent wealth generator for investors.

The post I asked ChatGPT when the FTSE 250 will hit new record highs. It said… appeared first on The Motley Fool UK.

Given the ongoing debate about State Pension levels and eligibility, securing a supplementary income stream is essential, in my view. The good news is that securing a life-changing passive income is a realistic target with a well-diversified portfolio of global shares and other assets.

For a regular £3k monthly income, an investor may need a Stocks and Shares ISA of £900,000. That’s based on an annual drawdown rate of 4% that would likely provide a lasting income for life.

That looks like a colossal amount of cash. But as the thousands of stocks ISA millionaires in the UK will tell you, it’s quite possible with a patient and structured approach.

The ISA route

The first thing to say is that using a Stocks and Shares ISA is a critical part of building long-term wealth. It’s the most generous investing product on the planet, and Britons who are serious about building long-term wealth should give it a close look.

The £20,000 annual deposit limit is more than enough for most people. And they protect investors from the cost of paying capital gains tax and dividend tax, savings that can be invested instead to speed up the wealth-growing process.

What’s more, unlike other savings products (including the Self-Invested Personal Pension (or SIPP), individuals don’t have to pay income tax on withdrawals. As a consequence, investors don’t have to factor in tax grabs when calculating their portfolio targets.

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.

Stick to a plan

The second essential thing to think about is committing to making regular investments. Why? Because making your money work for you consistently over time is how wealth grows.

The typical Briton invests just over £500 a month in the stock market today. Those that can keep this up and achieve a 9% average annual return on their cash could turn this sum of money into £915,372 over 30 years.

A retirement fund of this size would comfortably support the £3,000 monthly passive income we’re targeting.

Is that sort of return possible in the real world, though? It’s important to note that many won’t achieve this. But given the average long-term stock market investor achieves 8% to 10%, the answer is yes, it can be done.

Building our portfolio

With an ISA set up and investment plan sorted, it’s time to think about what to buy.

There’s no one-size-fits-all approach here. We all have different risk tolerances and investing styles. But there’s one universal truth: investors who spread their cash across different share categories, regions and sectors and have a better chance of building wealth.

This is where diversified products like investment trusts and exchange-traded funds (ETFs) can help. The Polar Capital Technology Trust (LSE:PCT) is one that could supercharge portfolio growth and demands consideration, I feel.

It invests in 92 different global technology stocks. This reduces the impact of one or two underperformers on overall returns, whilst allowing investors to harness the full potential of fast-growing segments like artificial intelligence (AI), robotics, cybersecurity and quantum computing.

The trust’s excellent returns speak for themselves. Since 2015, it’s delivered an average annual return of 22.6%. That’s more than double the 9% target in our above example. I’m optimistic it can continue delivering, even though it can underperform during economic downturns.

The post How big must an ISA be to provide you with a £3,000 monthly second income? 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.

The maths

Investing £1,000 a month obviously works out at 12 grand a year. Putting that into an account with a 0% rate of return, it would take just under 84 years to reach £1m, according to my calculator.

Barring some extreme medical breakthrough in the field of longevity, most people today haven’t got a spare 84 years to wait. So the main wealth-building fuel is the average rate of return achieved on this £12,000 a year.

This is where some guesswork comes in. The average return over a long period of time on a global index is about 10%, with dividends reinvested. It’s slightly lower in the UK, though the recent performance of the FTSE 100 has been stronger.

But it’s possible to do a lot better or worse than this 8%-10% ballpark figure. If an investor treats the stock market as a get-rich device, loading up on speculative penny shares, then it’s possible to lose a lot of money very quickly (and vice versa).

However, with experience, research, and a sound stock-picking methodology, it’s more than possible to beat the market. An average 10%-15% (or even higher) return is achievable picking individual shares.

Indeed, The Motley Fool was founded to show that it’s possible to beat the market!

But even by investing in indexes and investment trusts, I believe it’s entirely realistic to aim for a 10% return over time. And in this scenario, a £1m portfolio would be built in just over 23 years (with dividends reinvested and excluding platform fees).

Fun fact: letting the 10%-returning portfolio run for 84 years would end in about £376m! This highlights the incredible power of compounding (interest earned upon interest).

Opportunities galore

One stock that I think could beat the market over the next few years is Polar Capital Technology Trust (LSE:PCT). This is a smaller tech-focused trust than its better-known FTSE 100 peer Scottish Mortgage, but it has returned higher numbers.

The share price is up 113% in five years.

Yet I think it can head higher because manager Ben Rogoff has a proven record of picking great tech stocks. These include the usual suspects like Nvidia and Apple, but also savvy picks like Broadcom (up 104% in the past year) and web security firm Cloudflare (+169%).

Right now, he sees incredible opportunities to ride the artificial intelligence (AI) boom over the next decade. And to try to maximise returns, the trust is gradually moving away from the ‘Magnificent Seven’ stocks. It has added companies providing power to AI data centres, for example.

Naturally, there are risks associated with this inherent bias for tech stocks. If this sector sold off heavily — which last happened in 2022 — then the strategy would underperform.

However, over the long term, I’m very bullish on this trust. As Rogoff recently told the The Mail on Sunday: “The investment universe is in a state of flux and there are opportunities galore.”

Currently, the shares are trading at a 10% discount to net asset value, which I think provides a good entry point to consider.

The post How long would it take to build a £1m ISA share portfolio investing £1k a month? appeared first on The Motley Fool UK.

I’ve no plans to sell the FTSE 100-listed investment trust, which “aims to identify, own and support the world’s most exceptional growth companies”. It gives me access to Elon Musk’s Space Exploration Technologies, which is privately owned, as well as big tech names such as Amazon, the Taiwan Semiconductor Manufacturing Company (TSMC), Meta Platforms and Nvidia.

I accept it comes with risks. During the 2022 tech stock sell off, Scottish Mortgage shares crashed by half. And if the S&P 500 or Nasdaq take a beating, as they will at some point, so will Scottish Mortgage.

A tale of two tech trusts

But I was looking at the FTSE 100 performance tables when I spotted another investment trust I considered buying yonks ago, then forgot about: Polar Capital Technology Trust (LSE: PCT). This was the go-to collective investment vehicle for independent financial advisers, in the days when I used to talk to them a lot, when writing for other financial titles.

And while I wouldn’t have touched many of their recommendations with a barge pole, this one’s done brilliantly.

Polar Capital Technology isn’t hugely different from Scottish Mortgage. Its aim is to “maximise capital growth for shareholders through investment in a broadly diversified portfolio of technology stocks around the world”.

Shining FTSE 100 star

Unsurprisingly, it features many of the same names. Nvidia’s now top holding at 12.5% of the entire portfolio, with Microsoft, Meta, Broadcom and TSMC completing the top five. Apple‘s also in the mixer, as the seventh biggest holding.

I know we shouldn’t take past performance too seriously, but Polar Capital’s outstripped Scottish Mortgage on every recent timeframe, as my table shows.

The difference is massive. Especially over a five-year view, where Scottish Mortgage has done particularly badly, growing just over 18%, whereas Polar Capital will have doubled an investor’s money.

Polar Capital Technology’s red hot

Looking at these numbers, I appear to have backed the wrong horse. I’m clearly not the only one, as Scottish Mortgage is the bigger trust, with almost £15bn worth of assets under management, against £5.4bn for Polar.

So what can I read into that? The simplistic (but entirely reasonable) answer is that Polar Capital’s better at stock picking than Scottish Mortgage. It’s also less volatile. That doesn’t mean it would survive a tech sell-off. Yet it’s been more stable than Scottish Mortgage.

Despite Polar Capital’s superior performance, it isn’t any more expensive. Both trade at a discount of around 9% to underlying net asset value.

Scottish Mortgage has done well for me, but Polar Capital would have done better. Much better. That’s no guarantee it will continue its wining streak, but I’d argue that investors considering a tech trust today shouldn’t just make a beeline for the better-known Scottish Mortgage. Polar deserves to come in from the (relative) cold.

The post This overlooked FTSE 100 tech trust has smashed the Scottish Mortgage share price. 1 to consider? 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.

In reality, it’s all of the above. And each is pushing UK shares in different directions.

After two years of elevated borrowing costs, central banks across the globe – including the Bank of England — have now begun easing monetary policy. This has given a much-needed boost to assets like company shares, particularly in the FTSE 250 and tech-heavy global funds.

With ongoing tensions in Ukraine, the Middle East and now Taiwan, defence spending is ramping up on both sides of the Atlantic. That’s had knock-on effects for aerospace and defence firms listed in the FTSE 100.

Meanwhile, AI continues to drive investor enthusiasm, particularly in US mega-cap tech stocks. Nvidia leads the charge, supplying the chips that train and run large language models. Microsoft has invested billions into OpenAI and is embedding AI tools across its software ecosystem. Meanwhile, Meta and Alphabet are racing to develop next-gen AI platforms.

So how can UK investors take advantage of these structural shifts in the global stock market?

A trust that’s all in on tech

One option worth investigating is Polar Capital Technology Trust (LSE: PCT). It’s has been operating for over 25 years and holds a concentrated portfolio of 98 technology shares. Its managers actively seek out the companies driving structural change, including those at the heart of the AI revolution.

Its top four holdings are a who’s who of AI dominance: Nvidia, Microsoft, Meta and Broadcom. Altogether, around 73% of the trust’s assets are invested in North America, where most AI innovation‘s taking place. The remainder is spread across Asia Pacific (11%) and Europe (6%).

Over the past decade, the trust has returned an impressive 444%, which works out to an annualised return of 18.5%. Those are stellar numbers for long-term investors and demonstrate the power of staying invested in transformative trends.

But what are the risks?

Like most investment trusts, Polar Capital Technology Trust can trade at a discount or premium to its Net Asset Value (NAV). At times, this can create short-term mispricings, either favouring new investors or punishing them if sentiment suddenly turns.

It’s also worth noting that the trust uses derivatives. While this can enhance returns, it also increases risk. The use of options or futures can lead to greater volatility, reduced liquidity, or even sudden losses in extreme conditions.

Another consideration is cost. The trust carries a relatively high ongoing charge of 0.8%, which is notably above the average passive index fund. But for those who value active management and exposure to high-growth tech companies, it may be worth paying for.

Riding the AI wave

The stock market in 2025 is being pulled in multiple directions and investors need to be discerning. While Polar Capital Technology Trust might not be the most diversified of funds, it offers a way to tap into the booming AI and tech trends driving global markets today.

For long-term investors seeking exposure to tech growth outside of the UK, I believe this is a compelling option to consider.

The post What’s really driving the stock market in 2025? A closer look at 3 big trends appeared first on The Motley Fool UK.

Polar Capital Technology Trust

The technology sector is packed with investment potential. US chip-making giant Nvidia‘s rise to become the most expensive company in history (market cap: $3.92trn) on Thursday (3 July) underlines this point.

But while megatrends like artificial intelligence (AI), robotics and cloud computing are tipped for stratospheric growth, knowing which companies to buy to capitalise on them can be difficult. BlackBerry and Yahoo! are just a couple of former giants that failed to keep up with technological shifts.

Investment trusts like Polar Capital Technology Trust (LSE:PCT) help reduce this problem for us. This particular operation is invested in 98 different tech shares. These range from semiconductor manufacturers to software developers (like Microsoft), smartphone makers (such as Apple) and online retailers (like Amazon).

It’s critical to remember that many of the tech stocks it owns (such as Nvidia) command high valuations. As a result, the fund could fall sharply if market sentiment towards the sector begins to sour.

But I think the long-term benefits of ownership outweigh this possibility. Since 2015, the trust has delivered an average annual return of 19.9%.

One final thing: total the trust trades at a 9.2% discount to its net asset value (NAV) per share.

VanEck Defence UCITS ETF

European defence shares have (largely) performed extremely strongly since Russia’s invasion of Ukraine just over three years ago. With rising defence spending since then, it seems as if the sector has further room to grow.

The VanEck Defence UCITS ETF (LSE:DFNS) could be a a great fund to consider in this landscape. While there are uncertainties over future US defence spending, expenditure in Europe is expected to soar to pick up the slack and respond to perceptions of a rising global threats.

Defence-related expenditure has risen by three-quarters since early 2022, according to analysts at Allianz. And they think spending will have to rise significantly if NATO members are to meet a target to spend 3.5% on core defence (such as weapons and manpower) by 2035.

It projects, for instance, that Germany will have to spend an extra $64bn per year, Italy $47bn, France $45bn and the UK $41bn, relative to last year’s levels.

This bodes well for the 29 defence contractors that this VanEck ETF owns. These include US industry giants like Palantir and RTX, alongside Europe-based companies like Thales and Leonardo.

As the fund was only launched in March 2023, it’s not possible to compare any sort of long-term returns as I can with Polar Capital. But since 2023, it’s provided an average annual return of 22% with the total return in that period being 57.3%.

A £160k return

Past performance isn’t a reliable guide to the future. But I’m optimistic it can continue delivering strong returns in the developing geopolitical landscape. That’s despite ongoing challenges in defence, like supply chain disruptions and rising costs.

If VanEck’s fund can replicate recent returns, and Polar Capital can maintain its performance since 2015, a £10,000 lump sum invested equally across them could turn into £160,384 within 10 years. Things could go wrong too and investors could lose money. But I still think both are worth consideration now.

The post Consider 2 investment trusts and funds to target £160k from a £20k lump sum! appeared first on The Motley Fool UK.