PERSONAL ACCOUNT

Four shares to buy for your bottom drawer: they should prosper for decades

The fact that stock markets have risen so strongly in recent years (and the fact that I’m getting older) means I am increasingly asked by friends and family what investments they should buy for their pensions and their children.

They could pay an authorised financial adviser for their ideas, or they can take the following investment tips from (unauthorised, unregulated) me.

My advice is to buy and hold shares in one or more of the following four investment companies: British Empire Trust, RIT Capital Partners, Caledonia Investments and Witan.

These are “bottom-drawer” investments. They have done well for decades. Literally decades – two of these firms have weathered both world wars. And I think they will do well for decades to come. They define “buy and forget”: they are actively managed in a consistent and credible way. That means you do not have to digest every scrap of news about them or track their share prices day by day.

I want to demonstrate that there’s some method to my suggestions and so, for what it’s worth, here is why I like them. First, they are all companies with shares listed on the London Stock Exchange and the smallest is valued at £1bn. So they are sizeable.

There is plenty of trading in their shares, which means you can invest easily and in small amounts.

All four invest in dozens of other businesses from all over the world. That means when you buy shares in these companies, you are ultimately buying into a far broader spread of companies across a range of markets with earnings in multiple currencies.

All four publish detailed and comprehensible accounts. You’re in the company of other small shareholders, as well as big institutional investors. If you really want to get engaged, all these businesses hold annual shareholder meetings at which you can ask any questions you like of the board.

And the boards, to me, are the big differentiator. They comprise named individuals whose personal reputations (and often, reassuringly, whose personal fortunes) are at stake. These companies aren’t hiding behind a big fund brand or bank or insurer. They rarely, if ever, advertise. They are not being promoted by marketing people who will change jobs in 18 months and cease to care.

Most of them are quite cheap to own: the portfolio managers and board are paid, of course, out of shareholders’ funds, but this too is transparent. In any case, cheapest is not best here, as in so many fields.

The four companies are not all the same. They would work well as “bottom-drawer” holdings on their own or collectively. I particularly like British Empire and Caledonia and have owned both for more than a decade. British Empire buys into “holding companies” (businesses rather like itself in structure, which in turn own other businesses) whose share prices do not fully reflect their

At more than 100 years old, some of these companies have enriched generations of shareholders