Putting these 4 in a Stocks and Shares ISA gives exposure to over 1,000 companies at a 10.6% discount!
Those with a Stocks and Shares ISA will be familiar how it can be badly affected by uncontrollable events. In recent weeks, President Trump’s erratic approach to tariffs has caused turmoil for global stock markets.
And with so much uncertainty, it’s hard to know who the winners and losers will be. That’s why, at times like these, I think it’s a good idea to try and spread risk over as many investments as possible. But that’s easier said than done. For example, how many is the ‘correct’ number of stocks to own?
A possible option
One way of achieving a diversified portfolio — with the minimum of effort — is to buy an investment trust. And I’ve found four that, between them, have positions in around 1,000 companies.
I say ‘approximately’ because some of their investments are in other trusts, and information about how many stocks these own isn’t readily available.
| Stock | Net asset value (£bn) | Market cap (£bn) | Premium / (Discount) (%) | Dividend yield (%) |
|---|---|---|---|---|
| City of London Investment Trust | 2.377 | 2.423 | 1.9 | 4.3 |
| Alliance Witan | 5.026 | 4.795 | (4.6) | 2.3 |
| The Bankers Investment Trust | 1.355 | 1.237 | (8.7) | 2.3 |
| Caledonia Investments | 2.937 | 2.000 | (31.9) | 2.0 |
| Combined | 11.695 | 10.455 | (10.6) | 2.7 |
Importantly for those looking to diversify, the four own shares in businesses that operate in many different industries including IT, financial services, healthcare, real estate and utilities, across every continent. Many of the stocks are privately-owned, which means they are less affected by stock market volatility.
Despite this, it’s inevitable there will be some overlap. For example, Alliance Witan (LSE:ALW), Caledonia Investments and The Bankers Investment Trust all own Microsoft shares.
And because these three trusts trade at a discount to their net asset value, they are – on paper at least — undervalued. However, it should be pointed out that discounts are common with these types of funds, especially ones that have a large exposure to unquoted companies. These holdings can be difficult to value as there isn’t an active market for their shares.
I also think it’s worth noting that the four share an impressive record of increasing their dividends for 58 consecutive years!
Top of the shop
The largest on the list is Alliance Witan. Following a merger with a rival in 2024, it became a member of the FTSE 100. The trust has a simple investment objective, which is to achieve long-term capital and income growth.
At 31 May, it held 229 stocks with a market-cap of £4.7bn. Its three biggest holdings were Microsoft, Amazon and Visa.
Some investment trusts can have relatively high levels of debt which makes them vulnerable to rising borrowing costs. But Alliance Witan’s gross gearing was only 8.4% at the end of 2024. Its target is 7.5-12.5%.
Over the past eight years or so, it’s delivered a healthy return. From 1 April 2017 to 31 May, its share price increased by 105.6%. During the five years to the end of May, it went up 76.3%.
However, because it mainly invests in global equities it’s not immune from stock market volatility. And over the past five years, the trust’s been marginally outperformed by the MSCI ACWI index, the benchmark against which it measures itself.
But with over 200 positions in 11 sectors, spread across four continents, it’s well diversified. On this basis, I think Alliance Witan’s a stock that those looking to follow a risk-averse strategy could consider.
As for the other three, I’d have to do more research before deciding whether to part with my cash but, in principle, I believe investment trusts are an excellent way of spreading risk.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Microsoft, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
