In your 60s, you have to be careful with your capital. At this stage of your investing career, you’re most likely towards the tail end of the consolidation phase of the investment lifecycle, and fast approaching retirement. As a result, there’s little place for high-risk investments. Having said that, maintaining some exposure to the stock market in your 60s is probably a sensible idea. After all, you could live for another 30 years. Inflation could increase significantly in that time. You don’t want to be running out of money in your 80s.
With that in mind, today I’m looking at two low-risk dividend investment trusts. Bear in mind that both of these trusts do invest in shares, so they’re obviously going to be more risky than holding cash in a savings account. However, both are managed cautiously, meaning that they could be a good option for those looking for low-risk stock market investments.
Standard Life Equity Income Trust
The objective of the Standard Life Equity Income Trust (LSE: SLET) is to provide people with an above-average income from their investment while also providing real growth in capital and income. Launched in 1991, the trust mainly invests in UK equities, yet may also allocate capital to fixed-income securities to supplement income or to provide stability when stock markets are volatile. The yield on the trust is currently 4% and dividends are paid quarterly.
The trust tends to hold between 50-70 stocks. As of the end of February, the largest holdings in the portfolio were Rio Tinto, Royal Dutch Shell, Aviva, Close Brothers and BP. All five of these stocks pay large dividends at present. Around a third of the portfolio was invested in FTSE 100 stocks, with just under 40% allocated to FTSE 250 shares.
Performance over five years has been good, with the trust’s net asset value (NAV) generating a return of 9.7% per year to the end of February. The ongoing charge is 0.88% per year. The fact that the trust currently trades at a small discount to the NAV, makes it an ideal low-risk investment vehicle, in my opinion.
City of London Investment Trust
Another trust that could be considered low risk is the City of London Investment Trust (LSE: CTY). Launched all the way back in 1891, this trust’s objective is to provide long-term growth in income and capital by mainly investing in UK equities.
Portfolio manager Job Curtis has been running the trust for over 25 years now, taking a cautious approach to managing investors’ money. Top holdings at the end of March were Royal Dutch Shell, HSBC, British American Tobacco, BP and Diageo, so, like the Standard Life trust above, there is a strong focus on blue-chip companies. The yield on the trust is currently 4% and dividends are paid quarterly.
Performance over the last five years to the end of March has been solid, with the trust’s NAV generating a return of 7.2%. Ongoing charges are low at just 0.42%, although this trust is currently trading at a small premium to the NAV. I believe this is an excellent trust for those with a low risk tolerance.