One excellent way to get exposure to long-term growth trends is to purchase a technology investment trust; however, be cautious of Magnificent Seven over-concentration
An intelligent path to growth and innovation investing is provided to investors by technology investment trusts. Technology companies have some of the most well-known stock market names, but investment trusts can provide investors with a more sophisticated strategy.
The focus of many investors' attention is on technology stocks as the Magnificent Seven earnings season gets underway.
By investing in tracker funds for your stocks and shares, ISA, or pension, you have most likely already gained significant exposure to the technology sector. Just over 30% of the SandP 500 and slightly less than 21% of the MSCI World Index are comprised of the Magnificent Seven alone. Put differently, your portfolio's broad stock market trackers have a healthy proportion of large tech stocks.
The good news is that one of the main forces behind economic expansion has always been technology.
"Investors can access rapidly expanding and inventive businesses that are influencing our progress by investing in technology," says Annabel Brodie-Smith, the Association of Investment Companies' (AIC) director of communications, in an interview with BFIA.
You might want to adopt a more active strategy, even though your tracker funds will provide substantial passive exposure to tech companies. If so, an investment trust with a technology focus might be a fantastic complement to your portfolio.
"Professional fund managers oversee a variety of businesses and assets in investment trusts, providing investors with exposure to a diversified portfolio and distributing their investment risk," explains Brodie-Smith.
They are never forced to sell holdings because they have a fixed pool of capital, she continues, which enables their fund managers to view the portfolio over the long term. For smaller technology companies or private businesses that are difficult to sell, investment trusts are especially well-suited.
In this article, we'll highlight seven investment trusts that could add technological vigor to your portfolio. Four of them can help you diversify away from the Magnificent Seven's over-concentration while still boosting your exposure to technology.
Three investment trusts that provide exposure to the Magnificent Seven and technology.
Together with other technology companies, these three investment trusts provide exposure to some or all of the Magnificent Seven stocks.
Technology Trust Allianz.
The manager of the Allianz Technology Trust (LON:ATT), Mike Seidenberg, began his career at the tech behemoth Oracle and has 25 years of asset management experience.
As of February 28th, 41.7% of ATT's assets were in the Magnificent Seven, meaning that, in relation to the overall stock market, it is overweight these stocks. However, there is some distinction from the group as a whole because it is not exposed to Tesla.
Polar Capital Technology. .
Polar Capital Technologies' (LON:PCT) exposure to the Magnificent Seven is about 35 percent, which is comparable to the S&P 500s. However, because of the trust's thematic focus, its portfolio is significantly more tech-heavy than that index. All seven of the Magnificent Companies share that allocation.
Ben Rogoff, the lead fund manager, says the trust's strategy actively seeks out companies that offer long-term growth potential by playing on long-term, structural trends, avoiding the hype that can result in stretched valuations in the tech sector.
Investing in Scottish Mortgage Trust.
Investments in disruptive growth companies are made by Scottish Mortgage (LON:SMT), one of the biggest and most well-known investment trusts.
Amazon, Meta, Nvidia, and Tesla were the only four stocks included in the Magnificent Seven, which held about 14.2% of assets as of February 2.
SMT has substantial stakes in non-US businesses like Mercadolibre, Bytedance, PDD Holdings, and Ferrari in addition to a number of cutting-edge private companies, including its largest holding SpaceX, Elon Musk's space exploration business.
To lessen Magnificent Seven concentration, four tech investment trusts are being established.
The aforementioned three trusts will all increase the tech exposure of your investments, but they will also add more Magnificent Seven to your portfolio to differing degrees.
The valuations of these companies "remain high despite the impact of Trump's tariffs," according to Brodie-Smith, which suggests that there is some concentration risk here.
She goes on to say that "it does make sense to have some exposure to these seven companies since they are large for a good reason and won't keep growing at the same rate forever." "To make sure they don't miss out on the future growth stories, investors should think about getting some wider tech exposure.
Without owning any Magnificent Seven stocks, these four trusts provide tech exposure if you want to invest in technology but steer clear of these stocks entirely.
Edinburgh World.
Baillie Gifford is the manager of Edinburgh Worldwide (LON:EWI), just like Scottish Mortgage. It makes investments in startups and small businesses with a global focus.
With more than 20 percent of its assets, software is its largest industry position; the next two, biotechnology and aerospace & defense, are also included in the larger technology theme. The assets of the trust are made up of well over half of those three industries combined.
Although Edinburgh focuses on smaller businesses, it also exposes people to companies with greater growth potential. While PsiQuantum and Oxford Nanopore provide exposure to emerging industries with significant growth potential, SpaceX remains the leading holding.
Investment Trust Herald.
Likewise, the Herald Investment Trust (LON:HRIL) invests globally in innovation, particularly in the fields of communications and technology.
Super Micro Computer, a partner of Nvidia, and online review site Trustpilot are among the top holdings as of this writing.
Augmentum Fintech.
Using a specialized strategy, Augmentum Fintech (LON:AUGM) invests in financial technology (fintech) businesses. It primarily targets private companies, and the management group has collectively managed 34 exits.
Neobank Tide, the investment platform Interactive Investor, and the international payment platform Volt are a few of the brands in its portfolio.
Trust for Seraphim Space Investment.
The Seraphim Space Investment Trust (LON:SSIT) invests in a global portfolio of space technology companies.
As of this writing, some of its most significant holdings are the space exploration company Voyager, the drone company QuadSAT, and the space internet venture AST SpaceMobile.
You can also think about the BFIA investment trust portfolio if you want a pre-made basket of investment trusts to invest in.
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