I think the Scottish Mortgage Investment Trust (LSE: SMT) is one of the best ways to invest in the global tech sector. This is why I’d invest £1,000 in the company today.
Scottish Mortgage Investment Trust: betting on tech
Over the past 18 months, technology has become a vital part of our lives. Before the pandemic, the sector was booming, but this trend has only accelerated over the past year.
And as companies and individuals have been forced into the 21st century. This has created a virtuous cycle whereby tech firms have more money to spend, which they can use to accelerate product development, which entices more customers, and so on.
I think I need to have some exposure to the global technology sector in my portfolio, but I don’t know where to start. The number of tech sector firms listed in London is relatively small, so investors have to go overseas to find other opportunities.
Investors can find some of the best opportunities in the US and China. Unfortunately, I don’t know these markets as well as London. That’s why I’d outsource the process to the Scottish Mortgage Investment Trust.
The trust is an experienced public and private equity investor. It’s been investing in these markets for more than two decades. Its experience helped the firm single out some of the best growth stocks of the past decade, including Tesla and Amazon.
A focus on China
Now the Scottish Mortgage Investment Trust is focusing on China. According to its latest investor update, nearly 20% of the portfolio is now invested in Chinese securities. Some 37% is invested in the US, and the remainder is spread around the world. UK equities account for just 0.8% of the portfolio.
The largest holding in the portfolio is the genetic sequencing group Illumina. This international diversification and exposure to high-growth stocks may mean the trust is unsuitable for some investors.
High-growth and tech-sector equities can be incredibly volatile. Some investors might not be comfortable owning such businesses whose stock can drop 10% or more in a single day if they disappoint the market.
Still, the Scottish Mortgage Investment Trust provides valuable international exposure and exposure to the sector. This is why I’d invest £1,000 in the company today.
Although I’d like to have some exposure to these markets in my portfolio, I’m also unwilling to allocate a large percentage of my assets, considering the risks outlined above.
As is the case with all active investment funds, there’s always going to be the risk that the fund manager picks the wrong investments. And the trust doesn’t offer much in the way of income.
With a dividend yield of 0.25% at the time of writing, income investors may well want to look elsewhere.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. The Motley Fool UK has recommended Illumina and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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