The Scottish Mortgage Invest Trust (LSE: SMT) has been one of the UK’s top performers over the past decade. The Baillie Gifford-run fund took off in 2020, when, despite the tough economic conditions, the trust managed to provide investors with a triple-digit return.
However, while the last month has seen the Scottish Mortgage share price regain some momentum, year-to-date the stock has been pulled back by nearly 25%. So, does this fall mean now is a good time for me to add SMT to my portfolio? Let’s explore.
Why is the Scottish Mortgage share price down?
So, why have we seen a reversal in the trust’s fine form in recent times? Firstly, this can be attributed to the rise in global inflation – with an example being the jump witnessed in the US. Rising inflation tends to lead to people switching their money to ‘safer’ value stocks. And given the large weighting SMT has in growth stocks, it’s clear to see why SMT has taken a hit.
As well as this, Scottish Mortgage has a tech-heavy focus. The last few years have seen these stocks explode, meaning SMT has shared the success seen. However, the struggles they have experienced in recent times has negatively impacted the Scottish Mortgage share price.
Long-term approach
However, I have always been an advocate of long-term investing. And I have often used SMT to exemplify this. Therefore, I’m not concerned by the issues above. Management is clear in stating that Scottish Mortgage invests for the long term, seeking growth opportunities along the way. The trust has survived a variety of challenges in the past, such as the 2008 financial crash. And these downturns have not impacted the return to investors seen over the long run.
What I also like about Scottish Mortgage is the diversity it offers to my portfolio within a single investment. The fund’s top 10 holdings include companies such as Tencent and Nvidia. These are companies that, in my opinion, have long-term growth potential. And this, along with the cheap ongoing charges of just 0.34%, leads me to believe the current fall presents a great opportunity to buy.
With this said, the exposure SMT has to Chinese equities may provide an issue. The pressure Chinese policymakers have been applying to a range of companies may impact the Scottish Mortgage share price should they target businesses in which SMT has an interest. However, this volatility is only short term. And as a fast-growing economy, I think the trust’s weighting in China will prove to be a long-term success.
Is it time to buy?
While SMT may face short-term challenges, I think the trust has the foundations to flourish in the future. Scottish Mortgage has a track record of rewarding investors who are in it for the long haul. And while past performance is not always an indication of the future, I further like SMT due to the diversification it provides me and the cheap fees that come with it. As such, I think the fall in share price is a great opportunity for me to grab some shares.
