I’ve accumulated just over £100,000 in my stocks and shares Isa and I’m a long-term investor, but I have a real mix of investments in there.
My Isa includes UK stocks, investment trusts and funds I have accumulated over the years for various reasons.
I would like to do some spring cleaning and simplify my finances. I want to get rid of the individual stock portfolio and instead hold about five investment trusts that I can easily manage. I prefer investment trusts over funds because I prefer the way they are structured.
I plan to hold 40% of my Isa in three riskier investments that I consider interesting and promising: a technology trust, a biotechnology trust and a UK securities trust.
I want to hold the remaining 60 percent in two global investment funds that I can buy and hold for the long term, but I don’t know which ones to choose. Do you have any expert recommendations on global trusts worth considering?
Going global: our reader is looking for two global investment funds to allocate 60% of its portfolio to
Helen Kirrane from This is Money responds: Global investment trusts allow you to spread your investment risk by investing in a diversified portfolio of companies spread across different regions of the world.
Interestingly, the global investment trust industry is also home to some of the oldest investment trusts in existence.
These trusts tend to have experienced fund managers picking stocks and several global investment trusts also have a track record of increasing dividend payouts for decades in a row. City of London Investment Trust, Bankers and Alliance Trust in particular have a 57-year record of continuously increasing dividends each year.
Investment experts recommend that you research the global trusts you are interested in and any others you have identified as potential securities to see if you are happy with the investment strategy, risk profile and fees. So you at least have some ideas for creating your new portfolio.
Laith Khalaf, Head of Investment Analysis at AJ Bell responds: Well done for tackling wallet spring cleaning. This is something that needs to be done from time to time, as we all sometimes find ourselves with a list of funds that could be simplified and consolidated.
For a £100,000 portfolio you might consider holding more than five trusts, but not too many as you need to keep them manageable, as you say.
But with current schemes you will end up with 13 per cent of your portfolio in each of the three trusts you described as riskier, so greater diversification might be warranted.
Laith Khalaf: Spring cleaning of the wallet should be done from time to time
You might also think about adding one or two more trusts to the global lineup, otherwise 30 percent of your portfolio will end up in each of the two trusts you currently have designs on.
That’s a lot of eggs in one basket. If these trusts underperform, it could have an outsized effect on your portfolio if they make up such a large percentage of it.
In terms of trusts you might consider, given the relatively small number of trusts you want to hold, I would say some diversification is essential. To this end, I think F&C Investment Fund And Alliance of trust are worth considering.
F&C holds around 400 stocks and Alliance Trusts holds around 200, with both delegating stock selection decisions to underlying regional specialists. These are two of the oldest and largest investment trusts and both are designed as core portfolio securities.
If you want to add other global trusts to the mix, you might consider Monks Investment Trust And Securities Trust of Scotland.
The first is led by Baillie Gifford and, in keeping with the house style, the executives choose growth companies that they believe will be long-term winners.
Securities Trust of Scotland is a global equity income trust which aims to provide growing income and long-term capital growth from a concentrated portfolio of quality companies. Distributed income can of course be reinvested to generate higher total returns in the long term.
I would also like to point out that global funds and trusts will already tend to have high exposure to technology due to the high weighting of Magnificent Seven technology stocks in global stock indices. You may want to consider this when considering a technology trust for your portfolio.
Kate Marshall: For most long-term, growth-oriented investors, a core of global equity funds or investment trusts makes sense.
Kate Marshall, senior investment analyst at Hargreaves Lansdown, responds: For most long-term, growth-oriented investors, a core of global equity funds or investment trusts is a sensible approach.
They offer diversification in terms of style, sector and geography, and the combination of these is supported by a professional fund manager.
Funds or trusts focused on specific regions or sectors can then be built around this.
My top choice of global investment trust for you is F&C Investment Trust. Global investment trusts offer a good level of diversification in a single trust. They provide exposure to a mix of countries, sectors and companies from around the world.
F&C Investment Trust is the oldest investment trust in existence, founded in 1868, and Paul Niven has run it for almost 10 years. It uses a multi-manager approach to invest in public and private companies around the world. This means that several managers are responsible for managing different parts and regions within the trust, giving it a lot of experience. Each manager has different strengths, styles and focus areas that are mixed and monitored closely.
The second choice of investment trust for you is Scottish American Investment Company. This trust is also one of the oldest investment trusts in the market, having been launched in 1873. James Dow and Toby Ross, the current directors, search globally for companies with sustainable growth potential and a dividend reliable.
They invest primarily in stocks from developed markets, which are expected to provide a reliable income stream and potential for earnings growth above inflation. Some investments in UK commercial property and global bonds provide useful diversification, while some stocks in infrastructure and real estate help diversify the income paid to investors and could deliver growth above inflation. Income can be paid out or reinvested to drive future growth potential.
Jason Hollands: A common mistake investors make is putting together collections of investments that are often purchased on a one-off basis.
Jason Hollands, Managing Director of Bestinvest responds: I doubt you’re the only one who admits that you think your portfolio is a “mix of investments.”
A common mistake made by investors is to put together collections of investments often purchased on a one-off basis, without necessarily first thinking about their overall asset allocation between different types of investments such as stocks, bonds, real estate , gold and cash.
I know you’re looking for two global investment funds, but for a more dynamic approach it might be worth it. Scottish Mortgage Investment Trustwhich is a concentrated portfolio of high-growth companies from around the world.
After a brilliant long-term performance, it has had a tough time in 2022 and for the first half of 2023, but recently announced a very bold move which will see Scottish Mortgage buy back up to £1bn of shares over the next few years. next two years. With shares trading at -13 percent discount, this could be an interesting time to take a stake.
Although investment trusts have many strengths – I’m a big fan of them – I wouldn’t be dogmatic about only using trusts in your portfolio: funds and ETFs are also worth considering.
For example, adding a small exposure to physical gold can help provide defensive characteristics to a portfolio during times of market stress, and this is most easily achieved by investing in an exchange-traded commodity like gold. Invesco Physical Gold ETC.
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