Interactive Investor

Ian Cowie: ignore the doom-mongers, 32 trusts are in ISA millionaires’ club

Our columnist explains that while there are often predictions that stock markets are overdue a steep fall, keeping calm and staying the course over the long term tends to pay off.

15th February 2024 08:10

Ian Cowie from interactive investor

As if to demonstrate the difference between true wisdom and mere cleverness, City wags joke that bears - or pessimists - have predicted 10 out of the last two stock market crashes. Now new research shows how 32 investment trusts would have turned long-term shareholders into millionaires, putting a cash value on how time in the market usually beats trying to time the market.

To be fair, that headline-grabbing outcome would have taken a quarter-century to achieve and I have owned only one of these investment trusts for that long, while also failing to put in the full ISA allowance every year, thus falling well short of the spectacular seven-figure outcome on that single share.

Even so, I remain grateful for the Association of Investment Companies’ (AIC) research, based on data from independent statisticians Morningstar, because I still own shares in six of the top-performing investment trusts - and recently bought stock in a seventh for my grandson.

First, though, spare a thought for the clever clogs who like to call the top of the market, all the way up. Albert Edwards, a veteran equity ­analyst with the French bank Société Générale and a former Bank of England economist, was at it again the other day, sounding the alarm about soaring valuations for the ‘Magnificent Seven’ technology shares: Alphabet Inc Class A (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA).

Edwards mused: “I never thought we would get back to the point where the value of the US tech sector once again comprised an incredible one-third of the US equity market. This just pips the previous all-time peak seen on 17 July 2000, at the height of the Nasdaq tech bubble. I cast my mind back to 2000 where the narrative around the then IT bubble was incredibly persuasive, just as it is now.”

It would be cruel to claim that was the last time such pessimism paid off, because cash beat share ownership for several short periods since then, including the global financial crisis in 2008 and the Covid pandemic in 2020.

Even then, the bears’ picnic did not look like much fun compared to running with the bulls - or optimists - when share prices were rising, as they did over three-quarters of all the periods of five consecutive years since 1899, according to Barclays Equity Gilt Study.

Never mind the generalities, here are two investment trusts that turned annual ISA allowances since 1999 into more than £2 million today. Step forward the private equity specialist HgCapital Trust (LSE:HGT) and the self-descriptive Allianz Technology Trust Ord (LSE:ATT). According to the AIC and Morningstar, they turned total investments of just under £307,000 over that quarter-century into £2,254,391 and £2,095,955 respectively.

I wouldn’t be human if I didn’t add that my long-term favourite, Polar Capital Technology Ord (LSE:PCT), was not too far behind with £1,912,656, which meant it ranked third over the period. Well, we can’t win them all and sometimes just getting on to the podium is a result.

Worldwide Healthcare Ord (LSE:WWH), another self-descriptive trust which I have held for more than a decade, came 11th, turning those ISA allowances into £1,197,232. Close behind in 12th is International Biotechnology Ord (LSE:IBT) Trust with £1,194,730.

Then, Fidelity European Trust Ord (LSE:FEV), a more recent holding, came 13th with a total return of £1,188,448. Canadian General Investments Ord (TSE:CGI), my fifth fund in the top 20, delivered £1,159,765 to those who invested their full ISA allowances over that quarter-century. It came 15th on the list.

For completeness, I should add that JPMorgan Indian Ord (LSE:JII) - which became my first 10-bagger, after I paid 63p per share in June 1996 - also made the million mark on the AIC assessment with an outcome of £1,076,331.

Finally, I bought shares in F&C Investment Trust Ord (LSE:FCIT) last July, paying 886p for my grandson, Charlie. Had the little lad been investing the full ISA allowance since 1999, he would be sitting on £1,007,460 now.

Both JII and FCIT are lower down the list, in 24th and 31st places.

You might retort that if “ifs” and “ands” were pots and pans, beggars would ride on horseback. But I believe the AIC research makes a compelling case for long-term investment in a diversified range of companies, countries and currencies.

Cynics may scoff - and they often did so during the last quarter-century - but I can’t see how any of them profited from their pessimism. Or, to return to where we began, as the City wags say: bears sound clever but bulls make money.

The 32 ISA millionaire investment trusts

Rank

Trust name

AIC sector

% share price total return, 06/04/1999 to 31/01/2024

Total ISA investment value at 31/01/2024

1

HgCapital Trust (LSE:HGT)

Private Equity

3,700

£2,254,391

2

Allianz Technology Trust Ord (LSE:ATT)

Technology & Technology Innovation

1,894

£2,095,955

3

Polar Capital Technology Ord (LSE:PCT)

Technology & Technology Innovation

1,573

£1,912,656

4

Scottish Mortgage Ord (LSE:SMT)

Global

1,366

£1,639,261

5

Scottish Oriental Smaller Cos Ord (LSE:SST)

Asia Pacific Smaller Companies

4,024

£1,538,589

6

abrdn Asia Focus plc (LSE:AAS)

Asia Pacific Smaller Companies

3,742

£1,491,435

7

JPMorgan American Ord (LSE:JAM)

North America

889

£1,413,500

8

Pacific Horizon Ord (LSE:PHI)

Asia Pacific

2,334

£1,303,270

9

JPMorgan Global Growth & Income Ord (LSE:JGGI)

Global Equity Income

923

£1,268,898

10

BlackRock Throgmorton Trust Ord (LSE:THRG)

UK Smaller Companies

1,252

£1,214,138

11

Worldwide Healthcare Ord (LSE:WWH)

Biotechnology & Healthcare

1,999

£1,197,232

12

International Biotechnology Ord (LSE:IBT)

Biotechnology & Healthcare

1,846

£1,194,730

13

Fidelity European Trust Ord (LSE:FEV)

Europe

1,725

£1,188,448

14

Biotech Growth Ord (LSE:BIOG)

Biotechnology & Healthcare

1,317

£1,169,361

15

Canadian General Investments Ord (TSE:CGI)

North America

1,439

£1,159,765

16

BlackRock Smaller Companies Ord (LSE:BRSC)

UK Smaller Companies

1,138

£1,157,120

17

Mid Wynd International Inv Tr Ord (LSE:MWY)

Global

1,182

£1,142,541

18

Rights & Issues Investment Trust Ord (LSE:RIII)

UK Smaller Companies

1,588

£1,134,352

19

JPMorgan UK Smaller Companies Ord (LSE:JMI)

UK Smaller Companies

1,268

£1,123,473

20

The European Smaller Companies Trust PLC (LSE:ESCT)

European Smaller Companies

906

£1,112,995

21

JPMorgan European Discovery Ord (LSE:JEDT)

European Smaller Companies

1,664

£1,087,689

22

JPMorgan US Smaller Companies Ord (LSE:JUSC)

North American Smaller Companies

1,238

£1,086,589

23

Herald Ord (LSE:HRI)

Global Smaller Companies

855

£1,077,135

24

JPMorgan Indian Ord (LSE:JII)

India/Indian Subcontinent

1,778

£1,076,331

25

Montanaro European Smaller Ord (LSE:MTE)

European Smaller Companies

917

£1,066,051

26

ICG Enterprise Trust Ord (LSE:ICGT)

Private Equity

580

£1,065,553

27

AVI Global Trust Ord (LSE:AGT)

Global

1,482

£1,058,026

28

Fidelity Asian Values Ord (LSE:FAS)

Asia Pacific Smaller Companies

806

£1,055,507

29

BlackRock World Mining Trust Ord (LSE:BRWM)

Commodities & Natural Resources

1,853

£1,037,056

30

Pantheon International Ord (LSE:PIN)

Private Equity

1,017

£1,027,265

31

F&C Investment Trust Ord (LSE:FCIT)

Global

681

£1,007,460

32

Henderson European Focus Trust Ord (LSE:HEFT)

Europe

745

£1,005,182

Source: theaic.co.uk Morningstar. % share price total return is for a single lump sum invested at the beginning of the period. Total ISA investment value is the total value of an investment on 31/01/2024 if the maximum ISA limit for each year had been invested annually from 1999 to 2023, with the investment being made on 6 April each year.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL), Canadian General Investments (CGI), Fidelity European (FEV), International Biotechnology Trust (IBT), JPMorgan Indian (JII), Microsoft (MSFT), Polar Capital Technology (PCT) and Worldwide Healthcare (WWH) as part of a diversified global portfolio of investment trusts and other shares.

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