I asked AI for the best way to balance out a Stocks and Shares ISA. Here’s what it said

When it comes to managing a Stocks and Shares ISA, striking the right balance is key. For fun, I asked an AI engine what it thought was the ideal mix, and the answer, while agreeable, was somewhat tepid. It said to diversify across asset types, keep things global, think long term and tailor to one’s risk tolerance.

A suggested structure might look like: 70% company shares (a mix of growth, income and defensive stocks), 20% bond funds for stability, and 10% optional extras such as property or commodities.

It suggested some foundational funds like the Vanguard FTSE All-World ETF and iShares Core MSCI World ETF. Both offer broad global reach, reduce single-country risk and make it easier for a beginner investor to spread risk.

While this does make sense, I think it’s a bit over-cautious and can limit growth potential.

Then there’s a role for defensive income shares. In a downturn, these can act as shock absorbers. For example, UK stalwarts like Tesco or Legal & General – brands many recognise – tend to hold up better than speculative tech names when sentiment sours. Their dividends may not rocket, but their stability often becomes the star.

While I agree with this, I think a stronger focus on growth is important.

A diversified, growth-focused option

One stock I believe bridges several of these categories is Scottish Mortgage Investment Trust (LSE: SMT). This hugely popular investment trust offers global diversification, growth exposure and a fair bit of income stability.

The trust invests across public and private companies worldwide, including big US tech names, Asian e-commerce players and emerging innovations.

It has a healthy balance sheet and a return on equity (ROE) of around 9.86%. Plus, it trades at a price-to-earnings (P/E) ratio of 11.8, which isn’t overvalued for a trust with high growth ambitions. 

It’s also benefitting this year from strong gains in its net asset value (NAV). 

Moreover, the trust’s recent performance beat the FTSE All-World index, returning approximately 11.2% in the year ended 31 March 2025, while the benchmark returned about 5.5%.

That said, Scottish Mortgage isn’t risk-free. It’s heavily tilted toward US tech and growth sectors, which means when those areas wobble, the trust will likely wobble hard with them. Also, its income yield is very modest — hovering around 0.5% in recent years. So it’s less about strong immediate cash returns and more about long-term growth and occasional dividend support.

And because it invests in private companies too, valuation shifts and illiquidity risks are higher than for pure public equity funds.

The bottom line

In my view, Scottish Mortgage is a trust that beginner investors should consider including in their ISA mix. It provides a bridge between aggressive growth and steadier income, offering diversification that many pure equity picks cannot.

But ultimately, the best way to balance a Stocks and Shares ISA is to build a portfolio that reflects personal goals, time horizon and risk appetite. Yes, consider a foundational global equity fund and sprinkle in steady income and defensive names — but don’t overlook riskier, growth-oriented stocks.

Rebalance periodically, keep an eye on costs and don’t put all faith in any single stock.

That, I think, is the kind of balanced approach that many experienced investors would recommend — and one I’m happy to follow.

The post I asked AI for the best way to balance out a Stocks and Shares ISA. Here’s what it said appeared first on The Motley Fool UK.

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Mark Hartley has positions in Legal & General Group Plc, Scottish Mortgage Investment Trust Plc, and Tesco Plc. The Motley Fool UK has recommended Tesco Plc. 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.

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