If you’ve just £1,000 to invest right now and don’t know where to start, I think the best place is a low-cost passive tracker fund or investment trust. In fact, if I had just £1,000 to invest today, that’s where I’d put my money.
Passive vs active
Where comes to choosing the right passive tracker fund or trust, investors are spoilt for choice. There are literally hundreds of options on the market to choose from, all of which offer something different. Some investment trusts even offer exposure to alternative assets such as real estate, private equity, and even aircraft leases.
The main difference between investment trusts and passive tracker funds is that investment trusts are actively managed. The trust’s managers try and pick stocks intending to outperform the market over the long term, and some have been highly successful.
James Anderson, who manages the Scottish Mortgage Investment Trust (LSE:SMT), for example, has been so successful in picking stocks that his trust has outperformed the Investment Trust Global benchmark by around 34% over the past five years.
Anderson, who has managed the trust since 2000, has a knack for picking high growth stocks. Currently, around 53% of the portfolio is invested in North American equities, with 20% invested in Chinese equities, and 18% in European stocks.
Each share in the trust currently costs around 530p, which means an investor could buy about 180 shares at the current price with an initial investment of £1,000.
Considering Scottish Mortgage’s track record of producing returns for its investors, this trust would be at the top of my list if I had £1,000 to invest today. That said, the one downside of the trust is its lack of income. With that being the case, I’d also add an income investment to my portfolio as well.
The FTSE UK Equity Income Index Fund from Vanguard would be my choice. This passive tracker fund aims to replicate the performance of the UK Equity Income Index over the long term, and there’s no active management involved.
The fund owns the 126 stocks that currently make up the index and charges 0.14% in annual fees to manage the portfolio on your behalf.
At the time of writing, this passive investment supports a dividend yield of 5.7%. Most investment platforms will let you invest from as little as £100 a month and, because this is a passive investment, you don’t need to worry about a Neil Woodford-style scandal.
The bottom line
Those are the two investments I’d buy if I had just £1,000 to invest today. While they’re both attractive holdings in their own right, I think a 50/50 portfolio of both could be a great way to build a portfolio of international growth stocks, and domestic-focused income plays in a matter of minutes.
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Rupert Hargreaves owns the FTSE UK Equity Income Index Fund. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019