Occasionally a friend asks me for financial advice, something I enjoy giving and good therapy while convalescing.
His portfolio is top heavy with Merchants Trust and Monks so he sold some of each to de-risk. His plan was to buy shares in Tesla because the shares lost about 65% last year. I had a fit. First, he has never bought a share in an individual company, he only buys investment trusts. Secondly, there’s no reason why they should not fall further this year. Thirdly, I reminded him I had lost money in Marks and Spencer buying when they seemed cheap. Fourthly, I suspect Tesla is still over-valued. Fifthly it does not pay a dividend. This steered him away from Scylla.
Then he veered towards Charybdis, McInroy & Wood’s Balanced Fund. Don’t get me wrong, it is an excellent if somewhat cautious choice if he didn’t already hold Personal Assets which is a similar fund.
Ideally he wants an investment trust trading at a big discount and with a high yield. There are plenty to choose from though none as good as Merchants Trust and they mostly have similar holdings as Merchants in UK equities. So not really de-risking. I think he needs something uncorrelated to his existing holdings trading at a discount, with a good record for growth and modest dividends and have suggested RIT and AVI Global Trust.
RIT trades at a 16% discount and yields 1.8%. It has returned 4% over five years. AVI trades at a discount of 9% and yields 1.7%. It has returned 28% over five years. Out of interest, Merchants Trust is at a premium of 1.6%, yields 4.7% and is up 15% over five years.
I already hold RIT and plan to put my 23/24 ISA into AVI. Annoyingly I recommended it in 2018 when it was called British Empire Trust but failed to take my own advice.
Prior to making any new investments in RIT, readers might be wise to read The DT’s recent Questor piece on the Trust and reasons for its potential future poor performance: https://www.telegraph.co.uk/investing/shares/wealth-preservation-trust-poised-suffer-big-falls/
I agree with the facts, particularly the illiquidity in unquoted companies but I do not share their pessimism; in fact I bought some more RIT this week. By the way the same criticism could be aimed at AVI. Comparing RIT with Personal Assets is like comparing a pineapple with a potato – they are two different varieties in the vegetable kingdom.
Sorry to ask, but is your RIT, RIT Capital Partners Ltd or Symbol RCP and AVI, Avi Ltd or Symbol AVI?
I am eager to follow your sage advice and it would be foolish to buy the wrong thing!
You are wise to check. A friend, intending to buy palm oil producer MP Evans found himself with shares in Evans Bank in New York. RIT Capital Partners: symbol RCP. AVI Global Trust: symbol AGT. To double check the RIT price should be about 2070 and AGT about 194. A similar investment company, perhaps less risky, is Caledonia Investments (CLDN) of which I have been a shareholder for decades.It has returned 21% over the last five years and is at a 29% discount.
Very interested in your thoughts on RIT. I’m intrigued (and encouraged) that you have made a further investment given the current issues.
I have another matter that I’d appreciate your advice on – I can’t see a way of contacting you directly so perhaps you could contact me. Many thanks.