Consider 2 investment trusts and funds to target £160k from a £20k lump sum!
I believe these high-growth investment trusts and exchange-traded funds (ETFs) could be excellent wealth creators over the next decade. Here’s why they’re worth further research today.
Polar Capital Technology Trust
The technology sector is packed with investment potential. US chip-making giant Nvidia‘s rise to become the most expensive company in history (market cap: $3.92trn) on Thursday (3 July) underlines this point.
But while megatrends like artificial intelligence (AI), robotics and cloud computing are tipped for stratospheric growth, knowing which companies to buy to capitalise on them can be difficult. BlackBerry and Yahoo! are just a couple of former giants that failed to keep up with technological shifts.
Investment trusts like Polar Capital Technology Trust (LSE:PCT) help reduce this problem for us. This particular operation is invested in 98 different tech shares. These range from semiconductor manufacturers to software developers (like Microsoft), smartphone makers (such as Apple) and online retailers (like Amazon).
It’s critical to remember that many of the tech stocks it owns (such as Nvidia) command high valuations. As a result, the fund could fall sharply if market sentiment towards the sector begins to sour.
But I think the long-term benefits of ownership outweigh this possibility. Since 2015, the trust has delivered an average annual return of 19.9%.
One final thing: total the trust trades at a 9.2% discount to its net asset value (NAV) per share.
VanEck Defence UCITS ETF
European defence shares have (largely) performed extremely strongly since Russia’s invasion of Ukraine just over three years ago. With rising defence spending since then, it seems as if the sector has further room to grow.
The VanEck Defence UCITS ETF (LSE:DFNS) could be a a great fund to consider in this landscape. While there are uncertainties over future US defence spending, expenditure in Europe is expected to soar to pick up the slack and respond to perceptions of a rising global threats.
Defence-related expenditure has risen by three-quarters since early 2022, according to analysts at Allianz. And they think spending will have to rise significantly if NATO members are to meet a target to spend 3.5% on core defence (such as weapons and manpower) by 2035.
It projects, for instance, that Germany will have to spend an extra $64bn per year, Italy $47bn, France $45bn and the UK $41bn, relative to last year’s levels.
This bodes well for the 29 defence contractors that this VanEck ETF owns. These include US industry giants like Palantir and RTX, alongside Europe-based companies like Thales and Leonardo.
As the fund was only launched in March 2023, it’s not possible to compare any sort of long-term returns as I can with Polar Capital. But since 2023, it’s provided an average annual return of 22% with the total return in that period being 57.3%.
A £160k return
Past performance isn’t a reliable guide to the future. But I’m optimistic it can continue delivering strong returns in the developing geopolitical landscape. That’s despite ongoing challenges in defence, like supply chain disruptions and rising costs.
If VanEck’s fund can replicate recent returns, and Polar Capital can maintain its performance since 2015, a £10,000 lump sum invested equally across them could turn into £160,384 within 10 years. Things could go wrong too and investors could lose money. But I still think both are worth consideration now.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Apple, Microsoft, and Nvidia. 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.
