In your 60s? Consider these low-risk dividend investment trusts

Edward Sheldon looks at two low-risk investment trusts that pay regular dividends.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In your 60s, you have to be careful with your capital. At this stage of your investing career, you’re most likely towards the tail end of the consolidation phase of the investment lifecycle, and fast approaching retirement. As a result, there’s little place for high-risk investments. Having said that, maintaining some exposure to the stock market in your 60s is probably a sensible idea. After all, you could live for another 30 years. Inflation could increase significantly in that time. You don’t want to be running out of money in your 80s.

With that in mind, today I’m looking at two low-risk dividend investment trusts. Bear in mind that both of these trusts do invest in shares, so they’re obviously going to be more risky than holding cash in a savings account. However, both are managed cautiously, meaning that they could be a good option for those looking for low-risk stock market investments.

Standard Life Equity Income Trust

The objective of the Standard Life Equity Income Trust (LSE: SLET) is to provide people with an above-average income from their investment while also providing real growth in capital and income. Launched in 1991, the trust mainly invests in UK equities, yet may also allocate capital to fixed-income securities to supplement income or to provide stability when stock markets are volatile. The yield on the trust is currently 4% and dividends are paid quarterly.

The trust tends to hold between 50-70 stocks. As of the end of February, the largest holdings in the portfolio were Rio Tinto, Royal Dutch Shell, Aviva, Close Brothers and BP. All five of these stocks pay large dividends at present. Around a third of the portfolio was invested in FTSE 100 stocks, with just under 40% allocated to FTSE 250 shares.

Performance over five years has been good, with the trust’s net asset value (NAV) generating a return of 9.7% per year to the end of February. The ongoing charge is 0.88% per year. The fact that the trust currently trades at a small discount to the NAV, makes it an ideal low-risk investment vehicle, in my opinion.

City of London Investment Trust

Another trust that could be considered low risk is the City of London Investment Trust (LSE: CTY). Launched all the way back in 1891, this trust’s objective is to provide long-term growth in income and capital by mainly investing in UK equities.

Portfolio manager Job Curtis has been running the trust for over 25 years now, taking a cautious approach to managing investors’ money. Top holdings at the end of March were Royal Dutch Shell, HSBC, British American Tobacco, BP and Diageo, so, like the Standard Life trust above, there is a strong focus on blue-chip companies. The yield on the trust is currently 4% and dividends are paid quarterly.

Performance over the last five years to the end of March has been solid, with the trust’s NAV generating a return of 7.2%. Ongoing charges are low at just 0.42%, although this trust is currently trading at a small premium to the NAV. I believe this is an excellent trust for those with a low risk tolerance.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Royal Dutch Shell, Aviva, Diageo and City of London Investment Trust. The Motley Fool UK has recommended BP, Diageo, HSBC Holdings, and Royal Dutch Shell B. 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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »