Scottish Mortgage shares could be rewarding. How’s the risk?


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As a long-term investor, my focus is on how stocks perform over the long term.In that regard, I think Scottish Mortgage Investment Trust (LSE: SMT) has many functions. Scottish Mortgage shares have fallen 37% over the past year.

However, it is 56% higher over five years, more than 450% over five years, and 760% higher after the millennium. Trust’s track record goes back even further. The last time we cut our annual dividend was 90 years ago.

The past is not necessarily a guide to what happens next. Scottish mortgage stocks have been richly profitable in the past, but that may not be the case in the future.Moreover, as an investor, you should consider the potential risks before investing in stocks. there is.

So, in my analysis, how do Scottish mortgages stack up?

Proven approach

The past is no guide to the future, but it can give you clues as to what might happen next!

As a mutual fund, Scottish Mortgage employs fund managers to allocate funds to various companies. This offers many potential benefits as an investor. Buying mutual fund shares not only exposes you to a diverse portfolio, but its managers actively scour the world’s stock markets in search of the next big thing. You may find great ideas that you miss.

They are also looking beyond the stock market. For example, the Trust owns shares of the unlisted SpaceX.

More recently, this approach has not worked, as evidenced by the sharp decline in the value of Scottish mortgage stocks. The fund manager reportedly calls 2022 a “humble yearholding like Tesla When Shopify Price drop.

crisis management

But I think it’s the flip side of Trust’s strong performance over the past few years.

Such success comes from investing in promising growth stories early in development. It worked fine for several years. But just as tech stocks have tumbled, so too has Scottish mortgages due to their heavy exposure to the sector.

Owning shares in mutual funds allows you to diversify. As is the case with Scottish mortgages, the funds may be spread across dozens of companies.

But diversification by itself does not guarantee positive returns. In fact, the decline in Scottish Mortgage stock reflects the fact that it has diversified into individual companies, but continues to be heavily influenced by some business sectors such as technology and healthcare. The trend has continued even after fund managers have reorganized their portfolios over the past few months.

my move

Clearly, there are some risks here. Tech valuations could fall further, which could have knock-on effects for Scottish mortgage stocks.

Nonetheless, as a long-term investor, I am drawn to the long-term risk versus reward proposition of buying shares in trusts. If I had the money to invest today, I would do just that.

Posts in Scottish Mortgage Stocks can be challenging. what about the risks? It first appeared on The Motley Fool UK.

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C Ruane has no positions in any of the mentioned stocks. The Motley Fool UK recommends Shopify and Tesla. The views expressed about the companies mentioned in this article are those of the author and may differ from official recommendations on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.

Motley Fool UK 2023



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