Scottish Mortgage Investment Trust (LSE: SMT) is not having a good run in 2022. This year, the trust is down around 20%.
I have a small holding in Scottish Mortgage, so I’m disappointed with the trust’s recent performance. But I won’t be selling my SMT shares on the back of the underperformance. Here’s why.
Why I’m not selling my Scottish Mortgage shares
Firstly, we need to put the short-term performance in perspective. While SMT has underperformed this year, over the long run, it has delivered phenomenal returns for investors.
For example, over the last five years, the trust has generated a share price return of around 180%. Meanwhile, over the last 10 years, it has generated a return of over 600%. These are far greater than the returns from the FTSE 100 or the S&P 500. So a 20% pullback is not the end of the world.
Secondly, I’ve always seen Scottish Mortgage as a higher-risk investment trust. And after its great run over the last few years, I’ve been expecting a pullback for a while. In my 2022 review, for example, I wrote “I do see SMT as a higher-risk investment. In 2022, I expect some volatility.”
Given its high-risk nature, I’ve always kept my exposure to SMT quite low. For example, at present, the trust only represents about 2% of my overall investment portfolio. So the pullback this year hasn’t hurt me too much.
Additionally, I’m a long-term investor. I don’t need the capital I’ve invested in SMT any time soon (it’s actually in my SIPP so I can’t touch the money anyway). So I have plenty of time to ride out the storm here.
I’m still bullish on SMT
Looking ahead, I think Scottish Mortgage can continue to play a valuable role in my portfolio. For starters, it gives me exposure to some really exciting growth stocks, such as Moderna, Tesla, Nvidia, ASML, and Tencent. These kinds of companies have considerable long-term growth potential, in my view.
Moreover, it gives me some exposure to unlisted companies such as Epic Games and Stripe. Normally, unlisted companies are only accessible to sophisticated investors through venture capital (VC) funds.
Overall, I see Scottish Mortgage as a great way to play the technology theme and get exposure to fast-growing, disruptive companies.
And I love the fact that the ongoing charge is just 0.34%. That’s a very attractive fee, to my mind.
The SMT share price could fall further
Of course, the trust could continue to be volatile in the short term. I fully expect the volatility we’ve seen so far in the high-growth area of the market in 2022 to persist for a while. With the US Federal Reserve looking to increase interest rates significantly this year, it’s not the ideal environment for high-growth stocks.
Meanwhile, stock-specific risk remains quite high. SMT has made large bets on highly-volatile stocks such as Moderna and Tesla. If these stocks crash, the SMT share price is likely to be impacted.
All things considered however, I continue to see Scottish Mortgage as a top investment trust for growth. So I’m not planning to sell my shares any time soon.
