Seven investment trusts to make your investments go global

The outlook for equities remains encouraging. An investment trust with an international remit will help you profit.

New York Stock Exchange building © iStockphotos

The US bull market "has been the most widely hated of all time"

With Wall Street hitting new highs and even the FTSE 100 index back above 7,500, many investors will wish they had bought stocks six months ago. But what should you do now? Jump in and risk an autumn sell-off or stay on the sidelines expecting a slide? The market gives no clear answer other than the old Irish quip "if I were you, I wouldn't start from here". Ed Yardeni, a strategist and economist, points out that the US economic expansion, now ten years old, is the longest on record.

No boom, so no bust

The next recession "has been the most widely anticipated of all time, which may explain why it hasn't happened. Meanwhile, we have the most widely hated bull market of all time." Valued at 16.7 times prospective earnings, the US market looks a bit expensive, but the valuation is below the 18.6 times reached in early 2018. Earnings growth is expected to be less than 5% this year, but to be in double digits next.

Valuations in other markets are lower, but their economies and markets are less dynamic. The alternatives to equities are not attractive: with the yield on ten-year US government bonds at just 2%, in line with inflation, the real yield is zero. In other bond markets, yields are lower and real yields negative, as they are for bank deposits everywhere. It's tempting to look for value in areas of the market that have been left behind, but such a strategy could prove too clever by half. Sticking to the global funds and leaving the asset allocation as well as the stock selection to their managers is a more cautious option.

These investment trusts were once UK-focused underperformers trading at substantial discounts to asset value, but that has mostly changed. Witan, Scottish Investment Trust and Bankers still have relatively high UK exposure, arguing that the UK market, dominated by international companies with limited exposure to the British economy, is highly international. But only Bankers (LSE: BNKR) has beaten the global index over three and five years. F&C (LSE: FCIT) and Alliance Trust (LSE: ATST) have significantly improved their performance, which has been in line with global indices over three and five years.

The star of the sector

Scottish Mortgage Trust (LSE: SMT),

Monks Investment Trust (LSE: MNKS)

Two smaller trusts with assets of £200m-£250m are also worth a look: the Mid Wynd (LSE: MWY) trust and Martin Currie Global Portfolio Trust (LSE: MNP). The former has built up a strong record investing in "growth stocks at conservative valuations". The performance of the latter has accelerated since a new manager, Zehrid Osmani, was appointed a year ago, but this could be a flash in the pan. It is one to keep an eye on.

There are no easy gains in sight, but the downside in equity markets looks limited and patience should be rewarded. Short term setbacks are always possible, but it's better to be invested than trying to finesse the next correction.

Recommended

Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Kieran Heinemann: the history of shareholder capitalism
Investment strategy

Kieran Heinemann: the history of shareholder capitalism

Merryn talks to Kieran Heinemann, author of Playing the Market: Retail Investment and Speculation in Twentieth-Century Britain, about the history of t…
17 Sep 2021
Why it pays to face up to your investment mistakes
Investment strategy

Why it pays to face up to your investment mistakes

Buying stocks can be a complicated business. But selling stocks can be tricky, too – even if you sell for the right reasons. Max King explains how to …
17 Sep 2021
Are stockmarkets heading for a fall?
Stockmarkets

Are stockmarkets heading for a fall?

America’s S&P 500 stockmarket index has gained 30% over the past year. Valuations may be high, but that doesn't necessarily mean investors should sell…
17 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021