I’ve had a few friends speak to me about their pension concerns, worried that the £8,500 per year they’re expecting to get won’t go very far. They’re also unsure of how old they’ll be by the time they qualify.
When I tell them I’m investing in shares in my SIPP to help me in my old age, there’s a common “ooh, that’s a big gamble, isn’t?” response, coupled with a similar take to Woody Allen’s “A stockbroker is someone who invests other people’s money until it is all gone.”
If you don’t feel confident picking your own shares and don’t want to trust your cash to an advisor, I reckon investment trusts are therefore a great way to go. They spread your money and provide diversity and, as you are both the owner/shareholder and the customer, there’s no conflict of interest.
Safety is the key
Personal Assets Trust (LSE: PNL) is an investment trust aimed solely at private investors, and over the past five years its share price has gained 25% while the FTSE 100 has only managed a disappointing 7%. Dividends are modest at around 1.5%, which is behind the Footsie’s average level, so I think I’d describe the trust’s overall returns as competent but not sparkling on first examination.
But its stated policy is “to protect and increase (in that order) the value of shareholders’ funds per share over the long term,” so it’s aimed at low risk investments. On that basis, I think it’s doing pretty well.
First-half figures released Friday show net asset value (NAV) up 1.9% to £395.50 per share, and the shares are currently trading at £398.10. That’s a premium of just 0.6%. The trust has a long history of trading close to NAV, which makes me think it’s pretty much hit the sweet spot between safety and growth, at least in terms of what its shareholders want.
For those who want to invest some cash but who see safety and low risk as their priorities, Personal Assets Trust could well be worth a closer look.
Great income investment?
I’m less concerned by risk myself, and I like the look of HICL Infrastructure Company (LSE: HICL). While some individual property, construction and infrastructure companies have been going through a bit of a tough time, HICL has seen its share price rise by 21% over the past five years.
That’s slightly less than Personal Assets Trust’s gain, but HICL pays significantly bigger dividends, with forecasts indicating yields of above 5% for the current year, and next.
Earnings have been erratic, as they frequently are in the infrastructure business, but investment trusts like this typically even things out over the long term to provide steady dividend income. And HICL’s record of doing that, and of keeping its dividend progressive, make it, as far as I’m concerned, a good investment for retirement income.
The trust’s first-half figures this week showed a 15% annualised NAV total return, with NAV reaching 156.4p at 30 September (from 149.6p in March). That puts the 159p shares on an undemanding premium of 1.7%, and for this level of performance I see that as an attractive price.