The Scottish Mortgage Investment Trust (LSE: SMT) share price seems to have gained some momentum over the past 14 days, rising over 13%. While this is positive news for investors, the shares are still down 22% year-to-date. Broadening this time horizon to a year, the shares have fallen 9%.
The trust had a knockout 2020, rising over 106% for the year. In fact, over the past 10 years, it has generated a monster 617% return. This has solidified it as one of the UK’s leading listed trusts. So, with the shares seemingly back on the rise, is now the time for me to buy in? Let’s investigate.
Why the Scottish Mortgage share price appeals to me
The primary reason why I like the look of the shares is the fact that they allow me access to a bunch of high-growth companies all in one investment. The fund’s top 10 holdings include Tesla (5.3%), Tencent (4.7%) and Nvidia (3.1%), all high-growth tech-focused firms.
While this helps me diversify my portfolio, it also gives me peace of mind knowing my shares will be actively managed. If the 617% 10-year returns aren’t evidence of this stellar management, then I don’t know what is. For more context, over this period, the shares have outperformed the FTSE All World Index by almost 400%.
In addition to this bundle of listed companies, Scottish Mortgage also gives me access to privately held firms such as Northvolt, a Swedish-based battery cell manufacturer, and ByteDance, owner of the popular social media app TikTok. Retail investors currently cannot gain access to these firms’ high growth, but holding Scottish Mortgage shares would allow me to.
Not out of the woods yet
While the Scottish Mortgage share price does look attractive to me, there are still a number of risks that could impact the trust’s performance.
Firstly, the global macroeconomic outlook seems to be pitted against the trust. Scottish Mortgage has a very high weighting to tech stocks. This is part of the reason why the shares generated such astonishing returns in 2020 as high-growth tech stocks soared towards the tail end of the year.
While this favoured the trust in 2020, in 2022 it could go the opposite way. Inflation is creeping up across the globe, and the way that central banks tackle this is by raising interest rates. Just last week the UK and US raised rates to 0.75% and 0.25%, respectively.
When rates rise, people shift their assets away from high-growth high-risk investments and into safer assets as they can achieve a higher return. This isn’t great news for a high-growth, tech-heavy trust like Scottish Mortgage.
The macroeconomic outlook has only been made more volatile by the tragic Russian-Ukraine conflict. This is the last thing that Scottish Mortgage shares need at the moment.
Would I buy?
The current macroeconomic climate doesn’t bode well for a trust like Scottish Mortgage. It could lead to some serious short-term volatility. However, here at The Motley Fool, we’re long-term investors. I think the long-term outlook could be bright for the trust. As such, I would consider buying Scottish Mortgage at the current share price for my portfolio.
