Best investment trusts to have in a Lifetime ISA

What should you be investing in with your Lifetime ISA? We asked Jason Hollands, Managing Director at Bestinvest, to tell us his top investment trust picks to help those who don't know where to start.

Lifetime ISAs (also called LISAs) can be used for two purposes: to save money to put towards your first property or to save for retirement. Which one you intend to use it for will be important, because they each come with very different time horizons. While a property purchase may be five years away, for example, retirement may give you a twenty or thirty-year timespan to invest.

So what exactly should you invest in with a Stocks & Shares LISA? Investment trusts can be a useful option - whether you’re saving for a house or for later life - says Jason Hollands, Managing Director at Bestinvest. We asked him for his top three choices for investment trusts to invest in with a Lifetime ISA and why.

Before we dive in, however, Hollands states that for those using a LISA to buy their first home within the next one or two years, you might be better off finding the most competitive cash rate on a regular savings account. However, if your house purchase is five to 10 years away, you could consider investing in a lower-risk investment trust.

Personal Assets Trust

One such lower-risk investment trust is Personal Assets Trust, which states its core aim is to “protect and increase (in that order) the value of shareholders’ funds per share over the long term”. This trust was established in 1983 and has built a reputation for having a highly-selective, global portfolio designed to preserve value– essentially, keep its share price steady with no nasty surprises.

Hollands explains: “Personal Assets aims to deliver inflation-trouncing returns, while placing a strong emphasis on avoiding losses. To do so, it will invest across a mixture of shares in blue chip [well-established, reputable] companies from across the globe, bonds designed to mitigate the effects of inflation - known as inflation-linked bonds - short-term and very low-risk bonds issued by the US and UK governments, plus gold bullion".

“When the stock markets are skyrocketing, Personal Assets won’t blow the lights out,” Hollands says, “but its steady eddy approach has a track record of delivering solid returns while holding up well in more difficult times, enabling investors to sleep easier at night.”

JPMorgan Global Growth & Income

If you have ten or more years to invest - so you don’t intend to buy a property for a while or your LISA is for retirement purposes - JPMorgan Global Growth & Income (JGGI) is a good, medium-risk option, says Hollands.

“This trust invests in a portfolio of high quality, typically large companies from across the globe, regarded as the very best ideas from JPMorgan’s enormous research analyst team. The trust enables investors to get exposure to well-recognised names such as Microsoft, Amazon, Coca-Cola and Mastercard.”

JGGI states its core aim is to “provide superior total returns and outperform the MSCI All Country World Index [an index which tracks the performance of shares in large and medium-sized companies in over 45 countries] over the long-term”. 

“While most of the investments are in developed markets,” Hollands says, “namely the US and Europe, there is also a little exposure to emerging markets through holdings such as TSMC - the world’s largest manufacturer of advanced microchips. The trust has annual costs of 0.50%, which is low for an investment portfolio that takes a very selective approach.”

Scottish Mortgage Investment Trust

For those with a very long-time horizon (so LISA owners saving for retirement) and an appetite for risk, Hollands suggests the Scottish Mortgage Investment Trust - which has nothing to do with mortgages but is managed in Scotland by Edinburgh-based firm Baillie Gifford. This is a high-octane trust, aiming to find and back some of the fastest-growing companies from across the globe, from the US to China.

Hollands points out that it was an early, and major, backer of Tesla and Amazon, and has backed many innovative companies over the years. He adds: “While primarily investing in stock market listed companies, it can also invest up to 30% in ‘unquoted’ [not publicly listed] companies. One example would be its holding in SpaceX – billionaire Elon Musk’s space exploration venture.”

Despite a solid history of good performance – it has increased its dividend payments for 41 consecutive years – Hollands concedes that Scottish Mortgage has hit a rough patch recently. “But fortune favours the bold and backing an investment trust when it has been out-of-favour can prove a canny move if the shares recover.”