Investing in ISAs and investment trusts could help you reach your financial goals. Maybe you’re planning for a property deposit. Or want to build up a university fund for the kids. Longer term, you probably have one eye on retirement. Whatever your money ambitions, Janus Henderson investment trusts are worth considering in your ISA investment ideas.
ISA is short for Individual Savings Account. Anyone over the age of 18 in the UK can save and invest into an ISA. There are different types of ISAs – cash, stocks and shares, and innovative finance – and you can put in a total of £20,000 across them each tax year (from 6 April to 5 April the following year). The main advantage of ISAs is that any gains – either in interest or investment returns – are exempt from capital gains tax (CGT) and income tax.
For investors looking to grow their money over the medium to long term (at least five years), a stock and shares ISA is an option. You can use it to invest in the shares of UK and overseas companies, corporate and government bonds, and funds, including unit trusts, exchange-traded funds (ETFs), and investment trusts. We’ll look at some ISA investment ideas later.
Since April 2024 you have been able to open and pay into as many ISAs of the same type as you like, as long as you don’t deposit more than the ISA limit of £20,000 a year in total across them all.
Junior ISAs, also known as JISAs, are a tax-free savings account for children under 18. It’s a way to save for your child’s future. You can choose between a cash or stocks and shares JISA. JISAs are long term (you can open one as soon as you child is born and invest in it for the full 18 years) so a stocks and share JISA could be worth considering. We’ll look at some Junior ISA investment ideas below.
You can save up to £9,000 in a Junior ISA, and the money is locked away until the child’s 18th birthday. The child can take control of the account when they’re 16, but cannot withdraw the money until they turn 18. Then the account becomes an adult ISA in their name.
A SIPP is a self-invested personal pension. Most people now have a workplace pension where your employer decides where you invest, with some input from you if you choose. But for people who want more freedom when it comes to investing for retirement or who are self-employed, a SIPP can be used to add to their pension investing. You can decide on your own SIPP investment ideas, and build a unique portfolio based on those preferences.
The maximum most people can pay into a pension is £60,000 in the 2024/25 tax year. You get tax relief on contributions to a SIPP, which means the Government tops up any money you pay in by 20%. Higher rate taxpayers can claim back another 20% via their self-assessment tax return, and for additional-rate taxpayers it’s 25%. Investments in a SIPP grow free of tax (like all pensions and ISAs). However, you may pay income tax if you withdraw money from a SIPP in your retirement.
What can I invest in?
You can use ISAs, JISAs and SIPPs to invest in a wide range of assets. These include equities (the shares of UK and overseas companies), bonds, also known as fixed income (corporate and government debt), commodities like gold and oil, funds, and cash.
Funds pool the money of lots of investors and manage them together in one pot. Funds include unit trusts, exchange-traded funds (ETFs), and investment trusts. Haven’t heard of investment trusts? No problem, we’ll come on to that. Funds can invest in equities and bonds, as well as property, commodities, and currencies.
Most people open an ISA, JISA or SIPP via an investment platform and invest that way. An investment platform is an online service that allows you to buy, sell, and manage your investments, track their performance, do research, and change the mix of your portfolio.
Each platform charges fees for these services, something to compare when thinking about which platform to use. Many investment platforms today can be managed via an app on your phone for convenience. Click here to find out more about how to invest through a platform.
How to build an investment portfolio
ISAs, JISAs and SIPPs give you the freedom to build your own investment portfolio. This could be investing for income and growth for the next five years. Or investing for retirement decades from now. Either way you’ll want to think about how to manage investment risk.
Risk
It’s important to remember, all investing comes with some risk. Your investment will go up and down over time, in what is known as volatility. Returns are never guaranteed. But usually the more risk you take, the more potential there is for higher returns.
For example, stocks are typically higher risk than bonds, but historically have returned more to investors. In a balanced portfolio, investors generally choose a mix of higher and lower risk assets to help guard against short-term losses – something like 60% stocks and 40% bonds is typical if investing for the longer term.
Investment goal
Another important factor to consider is your investment goal. When considering stocks and shares, the returns available largely fall into two categories: income or growth. Collective investments, like investment trusts and funds, can also aim to offer a bit of both.
An income investment aims for reliable, growing dividends. This may appeal to you if your goal is to achieve an income stream from your investments, for example to help fund your retirement.
A growth investment aims for steady growth in your initial investment over the medium to long term. This may appeal to you if your goal is to provide an investment pot that can be used for early retirement, property purchase or saving for children.
What is an investment trust?
An investment trust is a type of company listed on a stock exchange that works like an investment fund. Rather than its business being manufacturing a product, for example, the company is created to invest on behalf of its shareholders into other assets, like stocks and shares.
Investment trusts have some unique features to think about when considering them for stocks and shares ISA, JISAs and SIPPs:
Investments
Investment trusts can often access a wider range of investments compared to other types of funds, including companies not listed on stock exchanges, private equity, and renewable infrastructure like solar farms. They can hold assets that are harder to buy and sell, also known as ‘illiquid’, opening up more opportunities for investors.
Returns
From any profits it makes on its investments, the trust pays dividends to shareholders, monthly, quarterly, or annually. But investment trusts can hold back up to 15% of their annual income in a reserve to be used during periods of lower earnings. This means investors in investment trusts could enjoy more consistent returns than in other types of fund.
Independent board
Trusts also have an independent board of directors that makes decisions about how the investment is run. They are hired to put shareholders’ interests first. For example, they have the right to sack the fund manager if they are unhappy with the trust’s investment performance.
AGM
As companies, investment trusts hold annual general meetings (AGMs). This is where shareholders of the trust come together to hear updates on the company’s performance, ask questions, and vote on important decisions regarding its management.
Introducing Janus Henderson investment trusts
Keen for some ISA investment ideas, Junior ISA investment ideas and SIPP investment ideas? Janus Henderson has a wide range of investment trusts available, whether you are investing for income, for growth, or are investing for income and growth as a mix.
Here are some Janus Henderson investment trusts to consider:
Investment trusts for income
- City of London – The City of London Investment Trust invests in companies listed on the London Stock Exchange. This trust has proven itself for decades, weathering numerous market cycles since it was created in 1932. It has a 58-year record of dividend growth, making it the investment trust with the longest record of annual dividend increases.
Awards
- Henderson High Income – Henderson High Income invests in the UK in a combination of equities and bonds, so it already has a degree of diversification. The trust’s main aim is providing a dependable high source of dividend income, though the strategy also allows for capital growth. The trust has a longstanding track record of producing a high income, dividend growth and outperformance.
- Henderson Far East Income – Henderson Far East Income Limited aims to provide a high and reliable dividend income, while still generating capital growth. The trust has increased its dividend consecutively for the past 16 years by maximising the growing opportunities for high income investing in the Asia-Pacific market.
Investment trusts for growth
- The European Smaller Companies Trust – There are any number of European investment trusts. But smaller companies offer an exciting opportunity for investors aiming to grow their wealth. The European Smaller Companies Trust finds and invests in Europe’s undiscovered and promising businesses to grow investors’ capital.
Awards
- The Henderson Smaller Companies Investment Trust – For investors looking to build a diversified portfolio, the Henderson Smaller Companies Investment Trust offers a chance to invest in often overlooked and underappreciated smaller UK companies. The trust’s managers have hundreds of meetings a year to uncover opportunities for growth at a reasonable price.
Awards
Investing for income and growth
- The Bankers Investment Trust – The Bankers Investment Trust is focused on finding around 100 best investment ideas globally in a bid to deliver both capital growth and inflation-beating income over the long term. The trust has a 58-year record of raising dividends.
Awards
- Henderson European Trust – Henderson European Trust invests in companies listed in Europe, but which are leaders in their fields globally. Investors have the potential for investment returns from both share price growth and dividends.
Awards
- Lowland Investment Company – The Lowland Investment Company offers investors a lot of diversification in one fund. It invests in a blend of large, medium and small UK businesses. The trust aims to grow capital and income.
- The North American Income Trust – The North American Income Trust aims to achieve above average dividend income and grow investors’ capital over the long term by investing in a portfolio of mainly S&P 500 US companies. The fund managers pick US companies that are either producing income today or growing for income tomorrow. Recognised for its capital growth, the North American market also generates over a third of the world’s dividends.
How to invest for your ISA, JISA or SIPP
Head to our dedicated page to find out more about how to add investment trusts to your ISA, JISA or SIPP.
Glossary
Bond
A debt security issued by a company or a government, used as a way of raising money. The investor buying the bond is effectively lending money to the issuer of the bond. Bonds offer a return to investors in the form of fixed periodic payments (a ‘coupon’), and the eventual return at maturity of the original amount invested – the par value. Because of their fixed periodic interest payments, they are also often called fixed income instruments.
Capital
When referring to a portfolio, the capital reflects the net asset value of a fund. More broadly, it can be used to refer to the financial value of an amount invested in a company or an investment portfolio.
Diversification
A way of spreading risk by mixing different types of assets/asset classes in a portfolio, on the assumption that these assets will behave differently in any given scenario. Assets with low correlation should provide the most diversification.
Dividend
A variable discretionary payment made by a company to its shareholders.
Equity
A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bonds. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.
Exchange traded fund (ETF)
A security that tracks an index, sector, commodity or pool of assets (such as an index fund). ETFs trade like an equity on a stock exchange and experience price changes as the underlying assets move up and down in price. ETFs typically have higher daily liquidity and lower fees than actively managed funds.
Illiquid assets
Securities that cannot be easily bought or sold in the market, such as real estate, art or other valuables, as well as shares in some smaller companies, private company interests and some forms of debt instruments.
Index
A statistical measure of group of basket of securities, or other financial instruments. For example, the S&P 500 Index indicates the performance of the largest 500 US companies’ stocks. Each index has its own calculation method, usually expressed as a change from a base value.
Investment trust
An investment trust is a form of investment fund, specifically a publicly traded collective investment scheme that invests its shareholders’ money in the shares of other companies.
Growth At a Reasonable Price (GARP)
GARP investors seek companies offering consistent earnings growth that is higher than the broader market level, while excluding companies with high valuations.
Growth investing
Growth investors search for companies they believe have strong growth potential. Their earnings are expected to grow at an above-average rate compared to the rest of the market, and therefore there is an expectation that their share prices will increase in value.
Portfolio
A grouping of financial assets such as equities, bonds, commodities, properties or cash. Also often called a ‘fund’.
Risk/risk taking
The acceptance of greater risk in exchange for potentially higher returns. This can apply to both individual investors and companies. An assessment of investors’ attitude to risk forms a fundamental part of identifying a suitable investment strategy for their objectives.
Small caps
Companies with a valuation (market capitalisation) within a certain scale, eg. $300 million to $2 billion in the US, although these measures are generally an estimate. Small cap stocks tend to offer the potential for faster growth than their larger peers, but with greater volatility.
Disclaimer
There is no guarantee that past trends will continue, or forecasts will be realised.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Use of third party names, marks or logos is purely for illustrative purposes and does not imply any association between any third party and Janus Henderson Investors, nor any endorsement or recommendation by or of any third party. Unless stated otherwise, trademarks are the exclusive property of their respective owners.
Henderson Far East Income Limited is a Jersey fund, registered at IFC-1 The, Esplanade, St Helier JE1 4BP, Jersey, and is regulated by the Jersey Financial Services Commission
Janus Henderson Fund Managers UK Limited was appointed as the AIFM of the North American Income Trust with effect from 1 August 2024. Prior to that date, the North American Income Trust’s AIFM was abrdn Fund Managers Limited and all information contained in this document should be considered accordingly.
Not for onward distribution. Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions. Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.
Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Henderson Investors International Limited (reg no. 3594615), Janus Henderson Investors UK Limited (reg. no. 906355), Janus Henderson Fund Management UK Limited (reg. no. 2678531), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority), Tabula Investment Management Limited (reg. no. 11286661 at 10 Norwich Street, London, United Kingdom, EC4A 1BD and regulated by the Financial Conduct Authority) and Janus Henderson Investors Europe S.A. (reg no. B22848 at 78, Avenue de la Liberté, L-1930 Luxembourg, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier).
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