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Diversification doesn’t need to mean settling for sub-par returns. With hundreds of investment trusts to choose from, UK investors can effectively spread their holdings to reduce risk, while still targeting significant capital gains and a large and reliable flow of dividends.
Here are three I think investors should consider as part of a high-performing Stocks and Shares ISA.
Tech star
The first thing to think about is harnessing the huge growth potential of the information technology sector. The digital economy continues to expand rapidly, and phenomena like artificial intelligence (AI), quantum computing, self-driving vehicles and automation are all tipped for incredible long-term growth.
The Allianz Technology Trust (LSE:ATT) is one investment vehicle that’s well placed to capture these opportunities. It holds a total of 49 tech shares, comprising market leaders and companies with great track records of innovation including Nvidia, Microsoft, Apple, Meta and Alphabet.
It’s important to remember that this sector’s highly cyclical, leaving the trust vulnerable in economic downturns. But I feel Allianz Technology’s long-term record speaks for itself. It’s delivered an average annual return of almost 8% since 2015.
Dividend collector
Holding a collection of dividend shares can provide a smoother ISA return over the economic cycle. Capital gains can be hard to come by during downturns, but this can be offset with shares that deliver a passive income.
The Chelverton UK Dividend Trust (LSE:SDV) can deliver on this strategy. Annual dividends have grown consistently for the last 14 years. And during the past five years, they’ve expanded at a healthy average rate of 6.3%.
City analysts expect this trend to continue. And so the dividend yield here for 2025 is an enormous 9.3%.
In total, the Chelverton trust holds shares in 66 companies, ranging from heavyweights with market caps above £1bn to tiddlers with a value below £100m. Therefore it provides exposure to mature companies with strong balance sheets, to smaller businesses with greater growth potential.
This weighting of small-caps admittedly also creates greater danger for investors. But as part of a diversified portfolio still think the trust’s worth considering.
The globetrotter
The final investment trust worth thinking about to round off our diversified ISA is the Monks Investment Trust (LSE:MNKS).
While the other two trusts provide exposure to just US and UK shares, this one’s net is spread far and wide, covering North America, Europe, Japan and global emerging markets. While the latter group may leave it more vulnerable to political shocks, its wide wingspan importantly also leaves it less dependent on a single region to drive performance.
This is another growth-based trust, but its 100+ holdings are widely spread across different sectors. These include tech stocks like Allianz Technology Trust owns, but also industrials, consumer goods, financial services and healthcare companies, among others.
It’s a strategy that’s paid off handsomely. Over the last decade, Monks has delivered an average annual return of roughly 13%.
