Quick context before the detail: here’s 1 way to pick buy-and-forget stocks for a lifetime sipp sits at the intersection of a few real-world decisions most readers face at some point. Here is a clear summary of what is going on, and why it matters.
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When stock markets are scary, we worry about our Self-Invested Personal Pension (SIPP) and Stocks and Shares ISA investments, right?
For a SIPP in particular, I reckon most of us want to minimise stress. And I like to look for the kinds of investments we can sit back and forget. But what might they be?
I think investment trusts can fit the bill quite nicely. And in particular, I favour one specific group of them.
Dividend Heroes
The Association of Investment Companies (AIC) maintains a list of those boasting at least 20 consecutive years of dividend raises. It calls them ‘Dividend Heroes’ and a number of them have achieved some quite remarkable feats.
City of London Investment Trust (LSE: CTY) and Bankers Investment Trust (LSE: BNKR) are among the leaders of the pack. They’ve both increased their dividends for a stunning 59 years in a row, without missing a single year.
What do they do?
Both aim for a combination of long-term capital growth and dividend income. The only real difference is in the stocks they buy and hold.
City of London puts its shareholders’ money mainly into companies on the London Stock Exchange. And note I say shareholders, not customers. That’s right, we don’t hand over our cash for them to manage — and use to prioritise their own profits, like some other kinds of pooled investments. No, instead we buy shares directly in the investment trust, which itself is a company listed on the stock market. That way, the profits for the company owners come to us… because that’s who we are.
City of London’s top 10 holdings include HSBC Holdings, Shell, BAE Systems, Tesco… And that immediately gives us a nice bit of diversification with a single investment. And that’s probably the single most effective way to minimise the pain of stock market volatility. Of course, if the whole market is down we should still see the trust’s share price fall. But it’s almost certainly to be less than the worst-affected stocks.
Wider outlook
Moving to Bankers Investment Trust, the outlook there is global, with a heavy American focus. Its top holdings include Nvidia, Amazon, and Apple. That does bring some risk of AI exposure, admittedly. But only around 12% of the trust’s cash is in these three. And JPMorgan Chase is in the top 10 too.
US stocks account for round two-thirds of Bankers’ total investments. And US markets do tend to lead the rest of the world in volatility. But it’s also the country that’s led worldwide stock market tables for decades. And I can’t see that changing any time soon.
Bankers has managed an average annual return of 11% since 2015, largely through the strength of American investments.
A good start
As well as general stock market risk, I reckon any failure to raise the annual dividend from either of these could trigger a share price dip. But considering them as a base for a SIPP, I really think they can bring better peace of mind than starting with — and worrying about — individual stocks.
