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If I were to start over as an investor today, I would probably put some of my money into mutual funds. They are similar to mutual funds, but with some structural differences. Trusts also tend to have lower fees, which is always a good thing.
55 years of dividend growth
The first trust I want to write about today has increased its dividend to 55 consecutive years. City of London Investment Trust (LSE: CTY) was formed in 1860 and has been investing in the stock market in its current form since 1932.
As you might guess, the primary objective of this investment trust is to provide a reliable income, backed by long-term capital growth. Most of the shares in which the trust invests are FTSE 100 companies with strong dividend histories.
For example, the top 10 holdings currently include british american tobacco, Shellgiant baby Diageoand pharmaceutical group AstraZeneca.
The City of London currently offers a dividend yield of 4.7%, compared to 3.7% for the FTSE 100. Generally speaking, the value of the trust has trailed that of the FTSE 100 in recent years.
There is no guarantee that future performance will reflect the past results of the trust. But with such a long track record, I am confident that this strategy will continue to work well.
world growth stocks
My next choice is completely different. Scottish Mortgage Investment Fund (LSE: SMT) is known for its long-term focus on disruptive growth businesses. Major holdings include vaccine company Modern, Amazon, tesla, and luxury group Dry.
The trust’s share price spiked during the pandemic, but has now returned to more reasonable levels. I’m starting to think this might be a good time to buy.
Scottish Mortgage is unusual in that the trust management actually takes a differentiated approach to selecting growth stocks. Although its major holdings are household names today, in many cases the trust was invested long ago, when the companies were much smaller.
Despite last year’s sell-off, Scottish Mortgage shares are up 360% in the last 10 years. That’s the kind of horizon investors need to have here, in my opinion.
The trust’s long-term focus means it could be many years before we find out if Scottish Mortgage has successfully identified the next big growth opportunities.
Despite this risk, I would allocate part of my portfolio to Scottish Mortgage. It’s genuinely different and has a very strong track record.
A yield of 6% of renewables
JLEN Environmental Assets (LSE: JLEN) invests in a wide range of renewable projects. Wind and solar power account for about 40%, but trust is also invested in waste and bioenergy, anaerobic digestion, and a variety of other growing areas.
In total, the trust has £12bn of assets under management, with 3.1GW of electricity generation capacity. Much of their annual revenue is backed by fixed price agreements and subsidies, so there’s good visibility for years to come.
Of course, subsidies also highlight a risk. Government policies can change. These projects could be less profitable in the future.
However, JLEN Environmental Assets is run by experienced managers and has been operating in this sector for almost 10 years. That’s quite a long time in renewables.
Management has increased the dividend every year since the trust’s IPO in 2014. The shares currently offer a 6% yield. I’m thinking of buying.
