Scottish Mortgage Investment Trust (LSE:SMT) is one of the UK’s most popular mutual funds. But 2022 didn’t work out.
Here, we review SMT’s 2022 performance. As a holder, we will discuss whether to buy more shares for 2023 and beyond.
2022 Performance Review
It’s fair to say that 2022 has been a disappointment for Scottish Mortgages. At the beginning of the year, SMT’s share price was 1,338 pence. But as I write (December 21st), it’s 720p. This corresponds to a reduction of about 46%. pain!
However, this should be taken into account. Over the past 5 years, SMT is still making a solid profit of about 60%. And as the chart below shows, FTSE100 and the S&P 500 Indices (we used Vanguard Tracker Funds as a proxy for these indices).
Meanwhile, over the 10-year period ending November 30, the trust delivered a return of approximately 471%. That’s more than double his return on the benchmark. FTSE All World Index.
It’s also worth noting that SMT performs worse, but better than Cathy Woods. Ark Innovation ETFhas a similar investment philosophy.
What is the reason for the sudden drop?
As to why trusts performed poorly in 2022, it has a lot to do with the fact that financial conditions have changed dramatically.
Interest rates have skyrocketed this year. As a result, investors have become more focused on profits and valuations. SMT has been hit harder than other funds and trusts. SMT focuses on high-growth companies, many of which have high valuations and no profits.
Should I buy more SMT for 2023?
So should you buy more trust shares? Well, as a long-term investor, I still think there are a lot of things I love about SMT.
First and foremost, you will be exposed to strong themes and trends such as:
These are the trends I want to touch on. They could create many investment opportunities in the coming years.
Second, it provides exposure to innovative companies such as: Tesla, NVIDIA, modern, snowflake, robloxWhen wise.
Many of these stocks are too risky to buy individually. But we are happy to own them as part of a decentralized mutual fund.
In addition, SMT has enabled the Swedish battery developer Northvolt and fortnite Creator Epic Games. Private companies are typically only accessible to sophisticated investors through venture capital funds.
The fact that you can get all this for a very low rate of just 0.32% per year (plus transaction fees) is appealing to me.
As such, we plan to purchase more shares in SMT for 2023.
That said, this is a risky investment. If interest rates continue to rise, growth stocks could fall further, driving down stock prices.
Equity-specific risk is another issue to consider. SMT tends to bet big on individual companies (Moderna is currently about 10% of the trust).This approach can backfire if things go wrong.
Given these risks, we intend to keep our holdings in Scottish Mortgages small relative to our overall portfolio.
Scottish Mortgage Investment Trust Review Posted: Should You Buy More Shares for 2023? First Appeared on The Motley Fool UK.
Edward Sheldon owns shares in Scottish Mortgage Investment Trust and Nvidia. The Motley Fool UK recommends Tesla, Snowflake and Wise. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations of 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 2022