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Scottish Mortgage share price is down 25%! Is it time to buy?

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the Scottish Mortgage Investment Trust (LSE: SMT) has been one of the best performers in the UK over the past decade. The Baillie Gifford-led fund took off in 2020, when, despite tough economic conditions, the trust managed to offer investors a triple-digit return.

However, while the past month has seen Scottish Mortgage’s share price regain some momentum, year-to-date the stock is down almost 25%. So, does this fall mean it’s a good time for me to add SMT to my portfolio? Let’s explore.

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Why is the Scottish Mortgage stock price falling?

So why have we seen a reversal in the fine form of confidence lately? Firstly, this can be attributed to rising global inflation – with an example being the jump observed in the United States. Rising inflation tends to encourage people to invest their money in “safer” value stocks. And given SMT’s heavy weighting in growth stocks, it’s clear to see why SMT has taken a hit.

On top of that, Scottish Mortgage focuses on technology. Recent years have seen these stocks explode, meaning SMT has shared in the success seen. However, the difficulties they have been experiencing lately have had a negative impact on Scottish Mortgage’s share price.

Long term approach

However, I have always been a believer in long-term investing. And I’ve often used SMT to illustrate this. Therefore, I am not affected by the above issues. Management is clear in stating that Scottish Mortgage is investing for the long term, looking for growth opportunities along the way. The trust has survived various challenges in the past, such as the financial crash of 2008. And these downturns have not impacted the return to investors seen over the long term.

What I also like about Scottish Mortgage is the diversity it offers to my portfolio within a single investment. The fund’s top 10 holdings include companies such as Tencent and Nvidia. These are companies that I believe have long-term growth potential. And that, along with the cheap running fee of just 0.34%, leads me to believe that the current drop presents a great buying opportunity.

That said, SMT’s exposure to Chinese equities can be a problem. Pressure from Chinese policymakers on a range of companies could impact Scottish Mortgage’s share price if they target companies in which SMT has an interest. However, this volatility is only short-lived. And as a fast-growing economy, I think China’s confidence weighting will prove to be a long-term success.

Is it time to buy?

Although SMT may face challenges in the short term, I believe the trust has the foundation to thrive in the future. Scottish Mortgage has a proven track record of rewarding long-term investors. And while past performance isn’t always an indication of the future, I still like SMT because of the diversification it gives me and the cheap fees that come with it. As such, I think the stock price drop is a great opportunity for me to enter stocks.