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OPINION

The road to riches

The road to riches
September 3, 2020
The road to riches

Or not, which is why we have also squirrelled money away for them in a pension that they will not be able to access until they reach retirement age. For starters that means 50 years of compounding will work its magic on the starting sum. But the underlying investment in the Sipp could make for a very comfortable retirement if it continues on its current trajectory – that investment being the Scottish Mortgage Investment Trust. 

We are, of course, not alone in entrusting their future wealth to its managers – in every survey we conduct it pops up as a reader favourite. Several colleagues have also chosen it as a home for their kids’ investments – as one put it: “There are no good reasons not to.” Indeed, it offers some exposure to the trends that are reshaping the world, notably tech, healthcare and the Asia pivot, and yet its shares still trade at a discount to net asset value. Its managers have a tremendous track record of backing the right horse. And although it is often characterised by concentrated positions in some of the world’s largest technology companies, it has a pool of smaller quoted and unquoted investments that could grow into the Teslas, Amazons and Alibabas of the future. And, of course, it’s cheap – important, because we don’t want charges compounding away our returns over 50 years either. 

So far it has not disappointed. Since we bought it for the kids, its shares have more than doubled, and since the start of 2020 – through one of the most volatile periods in economic history – they have climbed 55 per cent. Over 10 years, its share price is close to 10-bagger territory. Nevertheless, some nervousness is creeping in. The self-described contrarians at broker Stifel have suggested cashing in some of the recent gains, on the basis that a Biden victory might change US policies towards the technology industry, that tech shares like Tesla are more expensive than ever, and that investors might soon start rotating away from growth towards unloved value shares – meaning that Scottish Mortgage’s concentrated exposures could start to work against it.

Maybe so – and add to that worries over management succession, and the general geopolitical concerns over China, which accounts for a fifth of the trust’s exposure, and there could be short-term wobbles. But these worries feel both familiar and somewhat temporary. And when time is on one’s side – as it is for my kids and others that now have some cash to invest – why bet against a long-term trend that shows little sign of running out of road?