Despite a positive last few days, Scottish Mortgage (LSE: SMT) shares are still down well over 40% in 2022. And since the investment trust is one of the most popular holdings in UK portfolios, I doubt I’m the only one feeling a bit glum about it.
Still, I also reckon there’s a lot to like here. In fact, I fully intend to add to my holding in July.
What did I expect?
Perhaps the key thing for me to remember is that this investment trust’s portfolio is very much focused on disruptive growth stocks with a tech tilt. Now, all shares experience volatility from time to time. However, those that have the potential to change whole industries are more prone to this, due to the sizeable prices investors are required to pay to acquire them. Things can get even more rollercoaster-like if a business is currently unprofitable. When the market turns, boy, does it turn.
In short, if I have a problem with the dip in Scottish Mortgage shares right now, it might be due to me losing sight of my investment strategy rather than the trust itself. If I want to own tomorrow’s winners, I need to pay the entrance fee and learn to manage stomach-churning moves.
There are other things that continue to look attractive here. The diversified nature of its portfolio gives owners of this investment trust some security. While the probability of at least a few holdings folding is fairly high, I also suspect there are a few diamonds already present.
Let’s not forget that this is the same trust that bought into Tesla in the very early stages. Regardless of how one feels about Elon Musk (visionary? liability? both?), I think we can all agree that was a pretty great call.
This brings me to another point. Although long-time co-manager James Anderson has now left, fellow stock-picker Tom Slater remains and is now joined by Lawrence Burns. That’s a lot of experience still at the helm. And the price I’m required to pay for this in management fees? Just 0.32%. For an active fund, let alone one still up 83% over the last five years, that’s cheap.
So the only way is up?
Despite being bullish on Scottish Mortgage’s ability to recover strongly, don’t think for one minute I’m calling the bottom. Regardless of how good/promising its holdings might be, the investment trust could be dragged lower simply by general market sentiment.
This could be the result of higher/faster interest rate rises, a slowing economy, or some other ‘known unknown’. That’s the problem with markets — babies do often get thrown out with the bathwater.
Looking at this another way, the share price capitulation does allow me the opportunity to continue accumulating. Sure, it’s not easy. But I’ve been around long enough to know that it’s the Foolish thing for me to do.
Just. Be. Patient.
While I do think it’s prudent to not get too invested in any one position, I simply can’t see the future not being driven to a great extent by technological progress. Accordingly, it feels rational to continue drip-feeding my money into an investment trust that targets stocks in this area.
It’s always darkest before the dawn. It can also be the absolute best time to buy. Tick tock.