Investing in the US: your choices and key points to consider

 Dan Coatsworth 

• Invest with AJ Bell

Investing in the US: your choices and key points to consider

The US is home to the world’s biggest and most successful companies. Investors have made good money over the past decade or so from owning US stocks and funds, and it’s easy to understand why the region remains popular.

It won’t always do well, and there are risks around politics and economics. Yet investors with a long horizon might see merit in keeping part of their portfolio in the US. The big question is how to get exposure.

It’s important to consider your risk appetite when deciding how to invest in the US. A more cautious person might prefer to choose funds as they provide diversified exposure, spreading risks over a portfolio of companies so if something bad happens to one of them, the rest function as a cushion.

More experienced investors may prefer to choose their own stocks or pick certain funds based on their manager’s record. Someone who doesn’t want to spend time selecting investments or monitoring them in the future might prefer the low-cost, straightforward option of a US tracker fund. We’ll now run through the options in more detail.

Investing in the US via actively managed funds

Many investors are happy to pay an ongoing management fee for someone else to do all the hard work, pick stocks and manage a portfolio. Actively managed funds present investors with an opportunity to do better than the market. In the US, that typically means beating the S&P 500, Nasdaq or Dow Jones index.

It’s hard for a fund manager to beat the market year in, year out and eventually most managers will go through periods of underperformance. That’s just the nature of investing. As always, there are some that do better than others.

For example, among the funds that have outperformed, Axa Framlington American Growth has returned 286% over the past 10 years. That beats the 264% return from the S&P 500 index of US shares, according to FE Fundinfo data up to 22 October 2024. Its strategy is to provide long-term capital growth for investors by investing in a fairly concentrated portfolio of approximately 70 US stocks. The fund’s holdings include Apple, Microsoft, Nvidia, UnitedHealth and Booking Holdings.

As another example, CT North American Equity has outperformed the S&P 500 on a five-year basis, returning 114% versus 111% from the index. With circa 110 holdings in the portfolio, the fund has big exposure to technology, consumer products and financials.

Accessing the US market via low-cost passive funds

Investors who want to keep charges as low as possible may prefer to use an ETF or tracker, both of which fall under the category of ‘passive’ funds.

One of the most popular US-focused passive funds with AJ Bell customers is Vanguard S&P 500 ETF. It tracks the S&P 500, which features 500 big companies traded on the US stock market, including Amazon, Johnson & Johnson, McDonald’s, Netflix and Walt Disney. The Vanguard S&P 500 ETF charges 0.07% a year, which is only a fraction of what you might expect to pay for actively managed funds. For example, Axa Framlington American Growth charges 0.81%.

An alternative to ETFs is to buy a tracker fund. These are cheaper to buy and sell but not necessarily cheaper to own. ETFs are classified as shares so you pay £5 to buy and sell. In comparison, trackers are classified as fund, which only cost £1.50 to buy or sell.

L&G US Index Trust is one of the most widely held US tracker funds among AJ Bell customers and has an 0.1% annual management charge. So, it is cheaper to buy, but has a more expensive ongoing charge. L&G US Index tracks the performance of the FTSE USA index, which is a basket of approximately 550 large and medium-sized companies in the US, including iPhone maker Apple, tech giant Microsoft, electric vehicle seller Tesla and weight-loss drug specialist Eli Lilly . These are just two examples of US-focused ETFs and trackers funds; there are more available on the AJ Bell platform.

The main US market indices

There are three main alternative US market indices to the S&P 500 used by ETFs and tracker funds.

The Nasdaq 100 is a basket of 100 of the largest non-financial companies listed on the Nasdaq stock exchange in the US. Nearly two-thirds of the index is made up of technology companies, making Nasdaq 100 ETFs or tracker funds a popular choice for investors seeking tech exposure. You’ll find the world’s best-known tech firms in the index including Apple, Nvidia, Microsoft and Google’s parent company, Alphabet.

The Dow Jones index features 30 big companies from the US stock market including payments group American Express, sporting shoes maker Nike and grocery chain Walmart. Anyone investing in a Dow Jones ETF or tracker fund should recognise that the underlying portfolio is more concentrated than a Nasdaq 100 or S&P 500 fund.

Only tracking 30 names means any setbacks to one or more companies in the portfolio could have a noticeable impact on the overall performance of the Dow Jones ETF or tracker fund. The same principle applies if there is good news lifting one or more holdings. In contrast, the Nasdaq 100 and S&P 500 funds have more holdings and risks are spread more widely.

Another way of getting exposure to the US is to invest in a fund tracking the Russell 2000 index, which is a basket of 2,000 smaller companies.

You aren’t limited to these products. For example, you might wish to invest in US-focused ETFs and tracker funds that target specific styles of companies, such as those which offer high dividend yields or those which possess high earnings growth characteristics.

If u are saving for a specific amount on a specific date, u can’t accept the risk of saving using the market.

U could save in a cash ISA tax free but the amount u will earn is subject to future bank rates.

Another option is to buy a gilt, government debt, where if u hold to redemption the amount u will receive is guaranteed.

If held outside a tax wrapper the low coupon gilts e.g TN28 would be of interest as interest earned is taxable but any capital gain isn’t.

Blended yield is the gross redemption yield.

Gresham House Energy Storage Fund PLC

(“GRID” or the “Company“)

Operational capacity reaches 845MW / 1,207MWh and tolling update

Gresham House Energy Storage Fund plc (LSE: GRID), the UK’s largest fund investing in utility-scale battery energy storage systems (BESS), is pleased to announce the energisation of one new project and the energisation of battery duration augmentations on two existing projects adding 55MW and 176MWh of capacity to the operational portfolio. These projects are:

–     Elland, a 50MW / 100MWh new project near Leeds, was energised on 1 November.

–     Penwortham B, an augmentation to the original Penwortham site, was energised on 30 October, resulting in the project duration increasing to two hours (50MW / 100MWh)

–     Nevendon B was energised on 23 October. The augmentation has increased the capacity of the site from 10MW / 7MWh to 15MW / 33MWh.

This increases the operational capacity of the portfolio to 845MW / 1,207MWh from 790MW / 931MWh at 30 June.

In terms of tolling, the Company is also pleased to report that, of the 568MW announced as being contracted into tolling agreements with Octopus Energy, 260MW are now onboarded. Further capacity is expected to enter the agreement shortly, linked largely to operational timings on the remaining portfolio in construction.

Further updates will be provided as projects are commissioned and/or are onboarded into tolling.

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc & Managing Director of Gresham House New Energy, said:

“These updates will have a positive impact on revenues as more capacity translates into proportionately more revenues while tolling contracts have been struck at levels that remain above current merchant levels, increasing revenue per MW. Five of the seven augmentation projects planned for the year have now been completed, demonstrating the ability these projects have in rapidly bringing new capacity online.”

The most consistent income payer in the sector is City of London (CTY), holds the impressive distinction of delivering increased dividends for the longest consecutive period of any trust in the wider sector. Its 58-year track record of annual dividend increases underscores one of the key advantages of investment trusts – the ability to use income reserves to ensure smoother dividend payouts, even during tough market periods.

In our view, CTY’s record is remarkable, even though underlying earnings haven’t risen every year. CTY has had made effective use of the investment trust structure, which allows it to retain up to 15% of each year’s income in reserve. This reserve can then be drawn upon in leaner years to smooth dividends if revenues subsequently fall. For instance, when companies worldwide were forced to cut or suspend dividends during the pandemic, CTY was able to maintain its record of consecutive increases, despite a significant fall in revenue, as shown below.

DPS & EPS

Aside from consecutive dividend increases, we think  CT Private Equity (CTPE) stands out as a differentiated player in the income/dividend space. The private equity sector is experiencing wide discounts, prompting some boards to announce formulaic capital allocation policies that seek to allocate a proportion of future realisation proceeds towards capital returns through buybacks. However, the board of CTPE generally sees the dividend as a more equitable way of returning capital to shareholders, and whilst it has bought back shares on occasion, the preference is to return capital through a strict, formulaic approach to paying dividends. Consequently, this focus, alongside the managers’ investment process, has resulted in a historic dividend yield of 6.5%, attractive versus peers in the sector but also the wider trust sector.

Moreover, by favouring dividends as the primary means of returning capital we think CTPE provides a more predictable and transparent flow of income, particularly valuable for income-focussed investors who prioritise regular payouts over potentially unpredictable gains from buybacks. Furthermore, whilst buybacks can help manage discounts in the short term, they do not necessarily build long-term value in the same way that consistent dividend payments can. A risk worth bearing in mind is the illiquidity of the underlying assets, which, depending on the timing of the company’s other cash flows, may see CTPE use debt to fund the dividend, in turn increasing the gearing.

Kepler

If we look at LWDB a Trust to have in your buy list if/when Mr. Market gives u the chance.

If we look at the red line for six years u haven’t made any gains.

Then again at the blue line another six years.

But by sitting u have achieved the holy grail of investing of having a share in your portfolio a zero cost that provides income after u take out your stake to re-invest in a higher yielding Trust.

FY2025 dividend target of not less than 8.90pps.

For 2025, the board has set a target dividend for the year ended 30 June 2025 of not less than 8.90pps. The 1.1% year on year increase is down on BSIF’s traditional rate of dividend growth, however with one of the highest yields in the sector, the company has opted to focus some of its excess capital on additional share buybacks and the reduction of its RCF. This is a sensible approach in our view given the excessive discount on the company’s shares and the current cost of short-term financing.

For the anoraks, paid for research.

Bluefield Solar Income Fund – Compelling opportunity – QuotedData

Thursday 7 November

Care REIT PLC ex-dividend date
Chenavari Toro Income Fund Ltd ex-dividend date
CVC Income & Growth Ltd EURO ex-dividend date
CVC Income & Growth Ltd GBP ex-dividend date
EJF Investments Ltd ex-dividend date
European Opportunities Trust PLC ex-dividend date
Fidelity Asian Values PLC ex-dividend date
Henderson International Income Trust PLC ex-dividend date
Invesco Asia Trust PLC ex-dividend date
Invesco Perpetual UK Smaller Cos Investment Trust PLC ex-dividend date
JPMorgan Claverhouse Investment Trust PLC ex-dividend date
Marwyn Value Investors Ltd ex-dividend date
Partners Group Private Equity Ltd ex-dividend date
Picton Property Income Ltd ex-dividend date
Schroder Japan Trust PLC ex-dividend date
Starwood European Real Estate Finance Ltd ex-dividend date
Taylor Maritime Investments Ltd ex-dividend date

Remember if u buy close to the xd date u can earn five dividend payments for your snowball in just over one year.

Foresight Environmental previously JLEN Envirnomental

Dividend cover

Lots of further information/conjecture at the Oak Bloke maybe for Anoraks only ?

The Oak Bloke from The Oak Bloke’s Substack”

theoakbloke@substack.com

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206.232.2.123

I’m really enjoying the design and layout of your site. It’s a very easy on the eyes which makes it much more pleasant for me to come here and visit more often.

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Fairly straightforward to blog, especially if u really care about what u blog. I was advised to add a picture or two to catch people’s attention but apart from that all my own work. Tks for taking the time to read the blog and comment.

By Dr. James Fox

£9,000 in savings? Here’s how I’d aim to turn that into £400 of monthly passive income

Investing in stocks and shares is one of the most effective ways for me to generate passive income. By purchasing shares in companies, I can benefit from capital appreciation and dividends over time.

This strategy allows my money to work for me, providing a steady income stream without active involvement. With careful research and a diversified portfolio, investing in the stock market can be a rewarding path to financial freedom and long-term wealth accumulation.

What’s more, when I invest through a Stocks and Shares ISA — available through all major brokerages — all my earnings will be tax-free.

So how would I turn some savings, say £9,000, into a passive income that could truly change my life? Let’s take a look.

Compounding’s king

When it comes to building my portfolio for passive income, Compounding’s definitely king. Starting with £9,000, I have a solid foundation to harness the power of compound growth. By reinvesting dividends and capital gains, my initial investment can snowball over time, potentially growing exponentially.

To maximise compounding, I should:

Diversify my investments

Reinvest all returns automatically — growth-oriented companies typically reinvest earnings anyway

Make regular additional contributions to increase the pace of growth

Maintain a long-term perspective

Time’s my greatest ally in this process. The longer my money compounds, the more dramatic the results can be. For example, assuming an average annual return of 7%, my £9,000 could grow to over £35,000 in 20 years without any additional contributions.

However, if I make sensible investment decisions, my portfolio can growth much faster than that. For context, my daughter’s portfolio grew 35% in her first year. It’s going well in year two as well. Good investors can easily average double-digit returns.

So if I were to average 10% annualised growth, after 20 years my £9,000 would be worth £65,000. That’s without any additional contributions. And with £65,000, well, I could generate around £400 a month by invest in high-dividend yielding stocks.

But where to invest today?

At the time of writing, the Nasdaq is near an all-time high, US mega-cap stocks are trading at high multiples, the market’s digesting Labour’s first Budget, and the US election’s next week. This doesn’t make stock picking easy.

One interesting option to consider could be Greencoat UK Wind (LSE:UWK). This renewables fund currently trades at a 15.9% discount to its net asset value (NAV) — the value of its assets according to auditors — and offers investors a 7.5% dividend yield.

Greencoat UK Wind’s unique dividend growth policy, linked to RPI, is an attractive proposition. However, with RPI falling to 2.7%, the 2025 dividend increase is expected to be significantly lower than this year’s 14.2% rise. 

It’s also worth noting that the company’s performance is inherently dependent on the weather. Regardless of what management does, if the wind doesn’t blow, the fund will experience a bad quarter.

Nonetheless, I feel that’s baked into the prices we pay for wind-focused investments. It’s a sector benefitting from government backing and renewed investment under Labour. The lifting of a de-facto ban on onshore wind farms should be a long-term boost.

All-in-all, I’d back this firm to deliver double-digit returns over the long run. That’s the 7.5% dividend yield — which will rise relative to our buying price today — and share price appreciation of at least 2.5% annually.

The post £9,000 in savings? Here’s how I’d aim to turn that into £400 of monthly passive income appeared first on The Motley Fool UK.