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Is Scottish Mortgage Investment Trust a good choice for my stocks and shares ISA in 2024?

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Scottish Mortgage Investment Trust (LSE: SMT) has been a volatile investment in recent years. In 2020 and 2021, its share price rose as disruptive growth stocks rose. However in 2022, it declined as rising interest rates hurt this type of stock.

I hold Scottish Mortgage shares in my stocks and shares ISA so I’ve experienced this rollercoaster ride first hand. Should I continue to support this for my ISA today? Let’s discuss.

Investment strategy

A Scottish mortgage is an interesting investment strategy. Basically, it aims to maximize total returns over the long term by investing in the world’s most exceptional public and private growth companies.

Many of the companies investing in it are at the forefront of structural change. Its administrators believe that a small number of these will drive the trust’s return.

As a long-term investor with an investment horizon of several decades and a high tolerance for risk, I am very comfortable with this strategy. So I think it is suitable for my portfolio with the right weighting (more on that below).

Top 10 Holdings

As for the trust’s holdings, I like what I see today. At the end of February, the top 10 holdings were:

Stock The weight
ASML 8.2%
Nvidia 7.9%
Amazon 5.3%
Mercadolibre 5.0%
Moderna 4.7%
SpaceX 4.0%
PDD Holdings 3.8%
Tesla 3.5%
The fugitive 3.2%
North Volt 2.7%
Source: Scottish Mortgage Investment Trust

I think all of these companies have long-term potential. I’m particularly excited about the chip stock – ASML And Nvidia. Both of these businesses are at the heart of the artificial intelligence (AI) revolution.

There are some unlisted businesses on the list. But I am satisfied with it. Elon Musk’s space company SpaceX – a major player in the satellite broadband space – is another company I’m very excited about.

It’s worth noting that interest rate cuts – which most investors expect to see in the next 12 months – should be supportive of these types of disruptive growth companies. Lower rates could boost Scottish mortgage share prices as well as companies in trusts.

Correcting the size of my holdings

I expect Scottish Mortgage shares to be volatile going forward however. On its website, it says: “Investing in companies at the forefront of structural change means share price ups and downs are inevitable, both for the companies we own and the trust itself.

It further says: “The returns we aim to achieve for shareholders may be appealing to many, but the path set out to achieve them is not feasible.

So investors need to expect a bumpy ride here. Given the trust’s volatility, I would keep my position size fairly small. At the start of Q2, Scottish mortgages represented around 2.5% of my overall investment portfolio. Looking ahead, I may increase my weight a bit. But not more.

By keeping my weighting small relative to my overall portfolio, I won’t be badly burned if the trust suffers another crash.


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