Notwithstanding this, many such trusts have endured a difficult year so far. As a Fool focused on the long term, however, I see this as nothing more than an opportunity to load up.

Polar Capital Technology Trust

Performance-wise, FTSE 250-listed Polar Capital Technology Trust (LSE: PCT) was doing incredibly well prior to 2022. Not that this should come as a surprise. The emergence of trillion-dollar tech titans over the last decade was always bound to get investors salivating.

Sadly for those already invested, the year-to-date hasn’t been quite so kind. This investment trust’s share price is down almost a quarter, as I type.

Short-term blip? I think so. With literally billions of us committed to their ‘ecosystems’ I can’t imagine a scenario where the valuations of firms like Microsoft or Alphabet — two of the biggest holdings here — won’t recover. Yes, this might take a while. However, I would never think of buying shares here if my time horizon was anything less than a few years.

A word of warning

Naturally, I have no idea what will happen in the short term. Tech stocks could continue to be shunned by the market due to fears over rising interest rates. The latter tends to be bad news for companies who don’t expect to see profits for a while. Galloping inflation could also hit consumer demand for new products made by the sort of companies PCT holds.

For this reason, I’d need to look elsewhere as a way of balancing out the risk here. One option jumps out, also from the FTSE 250.

Blackrock World Mining Trust

Unlike most tech funds (including the one managed by Polar Capital), mining shares had a generally solid first six months of 2022. Investors, spooked by rising prices and the invasion of Ukraine, flocked to the likes of Rio Tinto and Anglo American. The Blackrock World Mining Trust (LSE: BRWM) also saw its share price soar.

Unfortunately, some of the gloss has now come off mining shares with several metals plummeting in value. The price of copper — often regarded as a bellwether for economic sentiment — recently hit a 20-month low.

This lack of control over the price of what they produce means the traditionally chunky dividends of mining firms can’t be guaranteed. As an indication of this, the aforementioned Rio Tinto recently halved its payout.

Safety in numbers

Still, the fact that the Blackrock investment trust spreads my money into many different companies digging up many different metals should help protect this income stream. Moreover, its managers can smooth what they pay out by holding back up to 15% of this cash in good years to return in less stellar periods.

I also think the long-term outlook could be great considering the amount of materials needed for things like electric cars and wind turbines. The possibility of a commodities ‘supercycle’ off the back of the green energy revolution remains a convincing argument for me to invest here.

I think some of these heavy fallers already look like they might be ‘no-brainer’ buys for my portfolio.

Halma

FTSE 100 health & safety tech firm Halma (LSE: HLMA) continues to appeal. Having lost 31% in 2022 so far, it leaves the share near its 52-week low. For a company whose products and services are deemed “essential“, thanks to increasing environmental and health legislation, that smacks of an opportunity to me.

Back in March, the company said it expects to deliver “substantial revenue growth” when full-year results are announced in June. Adjusted pre-tax profit is also likely to be in line with analyst predictions.

Halma looks in great financial shape too. This should permit further acquisitions to help drive yet more growth, not to mention keep the run of 42 consecutive years of dividend growth going.

Of course, no investment case isn’t without a niggle or two. With Halma, it’s the valuation. A P/E of 34 is far from cheap (although it’s far better than it once was). Nevertheless, I’d be happy to start buying today.

Watches of Switzerland

Also on my list of potential ‘no-brainer’ buys is luxury timepiece seller Watches of Switzerland (LSE: WOSG). At the time of writing, WOSG’s valuation has tumbled 35% in 2022.

This isn’t completely illogical. After multi-bagging in value between 2020 and 2022, some profit-taking was always on the cards here. It might be argued that the dramatic rise in the cost of living and the subsequent hit to discretionary spending made selling a logical move.

Nevertheless, I reckon WOSG’s target group is unlikely to be feeling the pinch as much as others. What’s more, the company has already said trading has been “in line with expectations” in Q4. Another update is due tomorrow.

As such, I suspect more serious falls are unlikely, albeit not impossible. A forecast P/E of 18 already looks great value for a company whose share price should recover its positive momentum in time.

Polar Capital Technology Trust

The last stock for today is actually a fund rather than an individual company — Polar Capital Technology Trust (LSE: PCT).

Like the others mentioned, PCT’s value has crashed in the year to date. Personally, I see this fall as another chance to begin building a position in the FTSE 250 member that holds some of the biggest and best tech stocks in the world before sentiment changes for the better.

Naturally, no one knows when a recovery will kick in. Things could get even worse if interest rates rise at a faster clip than expected. However, the diversification offered by this investment trust helps mitigate this to some extent. A total of 104 company stocks are held in the portfolio.

Unless I think the likes of Microsoft, Apple and Alphabet are incapable of thriving again, I’m simply being given a chance to snap them up on sale. The only downside here is the inevitable management fees that come with investing in an actively managed fund.

Incredibly, a total of 30 investment trusts would have made me more than £1m if I had invested my full annual ISA allowance in the same trust each year, according to data from the Association of Investment Companies (AIC).

This assumes I invested my full ISA allowance on 6 April every year since ISAs were launched in 1999. In total I would have paid in £263,440 across 23 tax years.

I’m a fan of investment trusts

HgCapital Trust, which invests primarily in software and services businesses, would have turned my ISA contributions into a staggering £2,062,931 since 1999. I don’t know much about that particular fund but I’ve kept close tabs on the second and fifth-best-performing investment trusts.

Scottish Mortgage Investment Trust (LSE: SMT) and Polar Capital Technology Trust (LSE: PCT) have amazing track records. They would have transformed £263,440 into an incredible £2,046,762 and £1,555,681 respectively since 1999, AIC figures show.

Both funds built their success on the all-conquering technology sector, and I really wish I’d bought at least one of them. But I didn’t, and I wouldn’t today. Investment trends go in cycles and I suspect the tech sector that’s important to them will now struggle to repeat its fabulous success.

Scottish Mortgage, managed by Baillie Gifford, now has £13.9bn worth of assets under management. That’s a tribute to its blistering performance. At one point, it had returned a staggering 500% in five years. Yet nothing lasts forever and the king of investment trusts has fallen more than a third in the last six months.

Near-zero interest rates and loose monetary fiscal policy drove the tech boom. Investors piled into companies like Apple and Amazon even as their valuations soared, assuming they would continue to grow and deliver even bigger profits in future.

That era is drawing to a close as central bankers prepare to hike rates and taper bond purchases. Inflation is rocketing, and that will erode the real terms value of future tech company earnings. This makes today’s sky-high valuations harder to justify. That’s putting me off these two investment trusts.

I’ve got enough US tech, thank you

Scottish Mortgage has massive holdings in US tech giants Amazon, Nvidia and Tesla, and Chinese behemoths Alibaba Group and Tencent Holdings. Polar Capital is a rollcall of US tech titans. Apple, Amazon, Google owner Alphabet and Facebook owner Meta make up the top four holdings. There’s a fair bit of crossover between these two investment trusts.

I still retain exposure to US tech, through an S&P 500 tracker fund, so there’s another reason for me to shun these two tech-heavy investment trusts.

US tech giants do look slightly better value after the recent sell-off, but I’m still not tempted. I’m always wary of jumping into once fashionable sectors, for fear of jumping on the bandwagon too late.

Once the glory days are gone they rarely return. But as I said, I’m a fan of investment trusts and I’ll still buy shares in some. Now though, I’m looking for those targeting FTSE 100 value stocks instead.

Despite this, I’m always on the lookout for alternative investment opportunities that may offer more growth. After all, SMT already had assets of £21bn at the end of June. Here’s another fund I think might be worth considering.

Tech-focused trust

With ‘only’ £3.3bn in assets, the Polar Capital Technology Trust (LSE: PCT) is nowhere near as big as SMT. However, it does have exposure to quite a few of the same stocks. These include online retail giants Amazon and Alibaba, Chinese internet titan Tencent, food delivery firm Delivery Hero and semi-conductor giant ASML. In addition to this, PCT also holds many of the usual suspects: Microsoft, Apple, Alphabet (Google) and Facebook.

As you might expect, PCT’s recent performance has been solid. Its share price is up 17% since July 2020. However, it’s the ascent of the share price over the longer term that shows just how lucrative big tech stocks have been for investors. Since 2016, the stock’s rocketed 238%! That’s a fine result, even though it lags the 357% achieved by the Scottish Mortgage Investment Trust. This difference may be partly due to the latter’s holding in Tesla, which PCT doesn’t own. 

Whether this performance will continue is another thing entirely, of course.

“Extraordinary times”

In today’s full-year results, PCT’s chair, Sarah Bates, was understandably bullish on the technology sector going forward. In addition to highlighting the “explosion” in cloud computing, Bates also said that more established companies were now showing evidence of their ability to move into new, exciting areas, such as electric vehicles. 

Even so, Bates cautioned that we were in “extraordinary times without much of a road map.” In addition to fresh worries over inflation, she warned that the “valuation gap between ‘growth’ and ‘value’ sectors has become very stretched.” 

These are important considerations for holders of any tech fund, in my view. As an investor, I suspect the near-term outlook may indeed be tough, due to those high valuations. As vaccination programmes progress, it’s last year’s biggest losers that will likely be 2021/22’s biggest winners. Think airlines, holiday firms and hospitality companies. The threat of increased regulation shouldn’t be ignored either. 

SMT vs PCT

Is one of these trusts better than the other? Based on gains so far, yes. However, past performance is no guide to the future. Moreover, both trusts clearly have a focus on ‘disruptive’ technologies that I’m looking to get exposure to.

Notwithstanding this, Scottish Mortgage Investment Trust is the clear winner on fees, at just 0.34%. For exposure to some of the world’s most exciting public (and private) companies, that looks great value. PCT charges 0.93%. On the flip side, the forthcoming departure of long-standing co-manager James Anderson may have unsettled some owners.

Happy holder

As a holder of Scottish Mortgage Investment Trust, I’m happy to stay invested and continue drip-feeding my money in. Despite this, I think PCT may be considered as a suitable alternative, especially if I grow frustrated by the antics of Elon Musk.

I rate both trusts as ‘buys‘ for my own risk-tolerant portfolio.

Why now?

On Wednesday, the US Federal Reserve concluded a two-day meeting that I’d say was very important to share investors. Fed chairman Jerome Powell noted that inflation could end up “higher and more persistent” than expected. Despite this, he indicated that interest rates are unlikely to rise until 2023.

What does this mean for stocks?

In recent years, many growth stocks have benefited from ultra-low interest rates and plenty of financial support from Federal Reserve policies. That’s particularly so for fast-growing US technology stocks. I’m closely watching for any signs of a reversal in policy by central banks.

So far, it sounds like any reversal is a few years away. This could be a good sign for growth stocks in the near term. However, a word of caution. One day the bull market is likely to end. This means that growth stocks will likely enter a period of turbulence and even falling stock prices.  

Best stocks to buy now

But I don’t see that happening yet. So I think the best stocks to buy now might be found in the technology sector. Tech stocks with high sales growth can be particularly sensitive to interest rates. Low interest rates for longer can mean those technology companies can fetch greater valuations.  

So which do I think are the best stocks to buy? I like Nvidia (NASDAQ:NVDA) – a giant in the graphics processing world. As the saying goes, it has ‘fingers in many pies’. Nvidia should benefit from several fast-growing areas over the coming decade. These include artificial intelligence, autonomous driving, and data centres.

In recent years, its double-digit rate of sales growth was partly due to the rise of gaming and cryptocurrencies, both of which heavily use Nvidia’s graphics processing units.

Future growth could come from new business areas like self-driving cars. However, with new ventures, Nvidia faces potential execution risk. It will need to carefully and accurately forecast supply and demand to avoid additional costs. 

That said, I like that it is founder-led, with growing earnings, and offers nearly 30% profit margins. It’s an impressive company, in my opinion. I’d say it’s high up on my best stocks to buy list.

Technology stars

There are so many other fast-growing technology stocks that I’d like to buy for my portfolio too. My list includes Amazon, Apple, Microsoft, Alphabet, and Facebook.

I could buy each of these individual stocks. Alternatively, I could buy a fund or investment trust that holds all of them. It might also work out cheaper with lower transaction and foreign exchange fees for UK investors.

My favourite option is Polar Capital Technology Trust (LSE:PCT). It currently includes all of the six technology stocks mentioned and these form 33% of the total portfolio.

A word of warning, however. Investing only in one sector could be volatile for a stocks portfolio. Also, if interest rate hikes are brought forward, the entire sector could experience some turbulence. That said, the Federal Reserve has just recently updated the market. The bull market continues… for now.

However, a large number of ‘expert’ stock pickers fail to produce value for their shareholders. With this being the case, you need to be careful where you decide to invest your hard-earned money.

Here are two investment funds that have a track record of creating value for their investors, no matter what the market throws at them.

RIT Capital Partners

RIT Capital Partners (LSE: RCP) is one of a handful of companies in the FTSE 250 that is still majority-owned and managed by its founding family. The trust was initially set up by the Rothschild family to preserve and grow their wealth over the long run.

Its managers have done an outstanding job of meeting this goal. A sum of £10,000 invested in RIT at inception in 1988 would be worth £326,000 today. That’s a total annual return of approximately 12.1% per annum.

The trust has achieved this return by investing in a basket of assets, including real estate private equity and derivatives.

Where the firm excels is protecting investors’ capital in volatile markets. That’s why the company could be a great addition to a retirement portfolio.

Unfortunately, due to its defensive nature and track record of creating value for shareholders, RIT is not cheap. It is currently dealing at a premium to net asset value at 5.5%.

Still, considering the company’s track record of creating value for investors, it might be worth paying this premium to be part of the trust’s shareholder register.

It also supports a dividend yield of 1.6% at a time of writing, which is more than you get on most savings accounts.

As such, if you are looking for a trust that can protect your wealth in all market environments, it could be worth taking a closer look at RIT.

Polar Cap Technology Trust

The technology sector has been one of the market’s best-performing industries over the past decade.

However, picking tech stocks can be a risky process. That’s where the Polar Cap Technology Trust (LSE: PCT) can help.

This trust has been navigating the technology industry since 1996. Over the past 10 years, the trust has returned 21.7% annualised. That’s enough to turn an initial investment of £10,000 into £71,000 today.

This track record suggests that Polar’s managers know how to pick tech stocks. While the trust does not offer the sort of asset diversification provided by RIT, its long-term returns suggest that if you’re looking to build a sizeable financial nest egg, this fund is certainly worth considering.

The good news is, today you can buy the trust as a discount. It is currently trading at a discount of 2% to its net asset value. It does not pay a dividend to investors, although considering Polar’s capital growth over the past decade, that’s not too much of a disaster.

The largest holding in the portfolio, making up 9.5% of assets under management, is technology giant Microsoft. The trust charges an ongoing management fee of 1.3% as well as a performance fee for good returns.

Ice cool

The two investments I’m looking at here are somewhat different to a cash ISA. They spread your money across a range of UK and global stocks in the red hot technology sector, making them high-risk, high-return vehicles.

The first, Polar Capital Technology Trust (LSE: PCT) invests in a portfolio of global technology companies and is big enough to be quoted on the FTSE 250 index. It was launched in December 1996, just as the dotcom boom was picking up speed, and survived the bust in 2000.

Capital idea

Today it announced its results for the six months to 31 October which showed an 8.5% rise in total net to £1.68bn, with the share price up 7% in the period, adjusted for sterling. The weak pound worked in its favour here because in local currency terms it was down 0.7%, although it still beat the FTSE World index over this turbulent period, which fell 3%.

However, Polar Capital Technology Trust has a good long-term track record and will suit those who still believe in the big US and Chinese tech giants, as its top 10 holdings include Google-owner Alphabet, Apple, Microsoft, Facebook, Alibaba and Tencent, a roll call of the big names in technology. The fund has grown a whopping 149% over five years, against 5% for the FTSE 100. My worry is that the US tech surge could be drawing to a close, and the trust is down 11% in the last six months. Nothing lasts forever.

I am therefore wary despite a low annual charge of 1% and discount of 6.45%. There is no dividend. This could be a case of right fund, wrong time. Unless I’m wrong and the technology bull run has further to go.

British tech

Herald Investment Trust (LSE: HRI) invests in quoted small and mid-cap technology, communications and media companies and has a great track record since launch in 1994, turning an initial £1,000 investment into £14,000.

With so many technology funds focusing on the US it is a novelty to see this one has 52% exposure to the UK, with only 24% in the States plus a smattering in Asia-Pacific and international equities. It has an annual charge of 1% but again, no dividend.

Hark the Herald IT

Herald has underperformed US tech-focused trusts as a result, although a return of 62% over five years looks good against just 27% on the FTSE All Share. Its top holdings are less familiar than Polar’s, with names such as GB Group, Diploma and Craneware, although you may know Boingo Wireless, IQE and M&C Saatchi.

The trust has total assets of £927m and currently trades at a massive discount of 19% to net asset value, which suggests to me investors are wary of this sector at the moment. This trust is at the riskier end and you also have to factor in Brexit, I suppose. It could do well if the UK bounces back next year, though.

Tech tips

If you’re looking for some funds to put in that pot, I’ve got a couple of tips for you. They’re quite specialist, but they might fit nicely around a broad-based fund, such as a FTSE All-Share tracker, or maybe one of these two global investment trusts that are absolutely smashing the FTSE 100.

Both are in the technology sector, which has been on a storming run lately although there’s no guarantee that will continue, especially with markets falling around our ears as I write this. My first suggestion, Allianz Technology Trust (LSE: ATT), is loaded up with those big tech names we know and love, with US giants Amazon, Alphabet, Microsoft and Apple prominent in its top 10 holdings.

Trumped

The £448m fund, which launched in 1995, is 88% invested in North American equities, with only a smattering of European and UK exposure. The US has been on a blistering run, but many fear it could be overvalued, with President Trump and Federal Reserve chairman Jay Powell tussling over the pace of interest rate rises.

Allianz Technology Trust is up a whopping 158% over five years, and investors are taking notice, making it the second most popular investment trust in the UK, after Scottish Mortgage, according to Interactive Investor sales figures. As a result, it’s trading at a 0.7% premium to the value of its underlying assets.

Polar climate

My other technology tip, Polar Capital Technology (LSE: PCT), has also enjoyed a rampant few years, rising 155% in that time, but it trades at a 2.3% discount. Again, it’s ridden the US tech stock boom, with a 72% stake in the market there, but wider exposure to Asia and Japan than Allianz.

Its top 10 holdings are also familiar… the fab four I mentioned above, plus Facebook, Chinese tech monsters Tencent Holdings and Alibaba Group,  Samsung Electronics and the Taiwan Semiconductor Company.

This £1.5bn investment trust launched in 1996 is also much in demand right now, the 10th most popular trust in the UK. 

Opportunity or threat?

Whether to buy technology is a tough call right now. First, you need to see how it would slot alongside your existing holdings. If you already have plentiful exposure to large US tech stocks, you probably don’t want to load up on more right now. Also, there’s the small matter of the market meltdown.

You will either see this as a threat, or an opportunity. Allianz Technology Trust is down 15% in the last week and Polar Capital is down 12%. We like the odd market crash at The Fool because it gives you the chance to load up on top funds like these at a discount. The risk is that the market crash continues, but that’s always the risk at times like these.

The good news is that some of them have been around for 100 years or more, so they have a lengthy record for investors to consider before buying. 

One that has recently popped up on my radar is the Value and Income Trust (LSE: VIN), which has a unique investment approach. 

A unique approach

Unlike other funds, Value and Income invests in both shares and property directly and has been successful with this strategy for over 30 years. 

Set up in 1986, over the past 31 years the investment trust has grown its net asset value from 44p per share at inception, to 356p today, a compound annual growth rate of 7.2%. Including dividends the trust has returned 7.6% per anum over this period, smashing the FTSE All Share’s return of 4.7% per annum. 

These steady, market-beating returns show that Value and Income’s strategy works but today, shares in the trust are on special offer. At the end of September, the net asset value was reported at 356p per share, so at current levels, the shares are trading at a discount to NAV of 23%. 

As well as the discounted valuation, the shares support a dividend yield of 4.1%. So, if you’re looking for an undervalued investment trust with a proven record of creating value for investors, this one ticks all the boxes. 

An investment in the future

Value and Income is a defensive trust with an impressive record but if you’re looking for something with a bit more risk, and a bet on future technologies, Polar Capital Technology Trust (LSE: PCT) might be for you. 

Over the past five years, shares in Polar Capital have gained a little over 200% as it has benefitted from the global tech boom. And today, the company announced yet another strong portfolio performance for the six months to the end of October. In the period, it reported a 19% rise in its NAV per share, outperforming its benchmark, the Dow Jones World Technology Index by 2%. 

According to management, gains came from companies benefitting from growth in payments (PayPal Holdings Inc), robotics (Cognex Corp) and iPhone content (Universal Display Corp). 

Unfortunately, while Polar Capital is a great way to play future trends, high demand means that it trades at a slight premium of 0.5% to NAV. No dividend is offered, but with such a strong capital performance over the past five years, arguably income is not necessary. 

Since the beginning of 2014, it has produced a total capital return of 731% for investors. Over the same period, the FTSE 100 has returned only 70% — it’s hard to ignore this scale of outperformance. 

If you’re looking to invest in the technology of the future, with a fund that has a proven record of beating the market, Polar Capital might be the company for you. 

Unfortunately for growth investors, nothing on the same scale has happened for investment trusts seeking to deliver long-term capital growth. There are fewer funds for growth-focused investor to pick from… but I believe I’ve found two exciting ones.

China’s growth story

Fidelity China Special Situations (LSE: FCSS) is a fund which seeks to offer direct exposure to China’s growth story. But instead of just investing in a broad market index tracker, this fund uses an actively-managed strategy in an attempt to beat the market.

Fund manager Dave Nicholls reckons there may be better investment opportunities from buying companies which are set to benefit from China’s structural shift away from a reliance on investment towards consumption. This is because, going forward, many analysts reckon China’s middle class will be the main driver of economic growth, benefiting companies which directly deal with consumers.

As such, the fund has an outsized exposure to the consumer discretionary sector, with a weight of 31.5%, compared to the benchmark MSCI China Index’s weight of just 9.5%. Technology stocks also dominate the fund (as it also does for the benchmark), with its two biggest positions being Tencent (14.7%) and Alibaba (13.7%).

On the downside, unbalanced, actively-managed investment trusts can have their disadvantages too. Firstly, there’s no guarantee that a specific sector will continually outperform the market, leading to occasional bouts of underperformance against the market index. Additionally, excessive focus on some sectors could reduce diversification benefits, potentially leading to higher portfolio volatility and risk.

Technology stocks

For investors looking to increase their exposure to technology stocks, the Polar Capital Technology Trust (LSE: PCT) may be of greater interest. The fund aims to maximise capital growth for shareholders through investing in a diversified portfolio of technology companies around the world.

Despite the recent sell-off in tech stocks over the past week, I reckon the technology sector holds plenty of promise for investors. Reflecting the impact of technology disruption on traditional industries, technology stocks have the potential to generate significantly faster earnings growth than the broader market.

Large-caps

Large-caps, companies with a market capitalisation of more than $10bn, dominate the fund’s top holdings, accounting for just over 75% of its portfolio. The fund is geographically diversified, although because of the sheer disparity in the number of large technology companies in the US compared to the rest of the world, the fund is heavily exposed to the North American market. US & Canada stocks account for 66.8% of its portfolio’s value, with 10 out of its top 15 holdings coming from there.

Its top five holdings are Apple (7.5%), Alphabet (7.4%), Mircosoft (6.2%), Facebook (6.2%) and Samsung Electronics (3.8%).