As the Scottish Mortgage Investment Trust (SMT) share price falls, here’s my next move

first_imgAs the Scottish Mortgage Investment Trust (SMT) share price falls, here’s my next move See all posts by Christopher Ruane Christopher Ruane | Wednesday, 12th May, 2021 | More on: SMT Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Since the start of the year, the Scottish Mortgage Investment Trust (LSE: SMT) share price has fallen 10%. It is still up 56% over the past year, so many long-term investors have had a good ride. But recent Scottish Mortgage Investment Trust share price performance seems underwhelming.So what’s behind the SMT share price fall and what would I do about it?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…US tech pullbackOne reason the SMT share price has dropped lately is a fall in the shares of the US tech names it owns. SMT publishes a full list of its holdings on its website.Take Zoom as an example. Shares in the videoconferencing provider have slumped 20% this year. That’s because more normal working patterns threaten to dampen demand. SMT holds 1m shares in Zoom. A fall in Zoom’s share price therefore negatively affects the value of SMT’s portfolio. But with a 73% increase over the past year, Zoom has performed well over the longer term.China tech regulatory concernsChallenges to the Scottish Mortgage Investment Trust share price are not limited to the twists and turns of the US stock market. A second factor concerns a regulatory clampdown on tech firms in China.SMT’s seventh-biggest holding is Chinese delivery company Meituan. That business seems to be embroiled in a potential government dispute in China. Its shares have fallen 15% this year, despite returning 121% over the past year.Relevance for the SMT share priceTo understand why this matters, consider the structure of the Scottish Mortgage Investment Trust.The company does not operate businesses. It is not designing video-conferencing software or employing delivery drivers. Instead it is a collective investment vehicle. It pools money from investors that it uses to buy shares. That means its performance is impacted by how well the companies it holds perform.Zoom or Meituan falling, for example, is a risk to the SMT share price. It effectively reduces the value of SMT. Its share price is not exactly correlated to its net asset value. But in broad terms if the net asset value falls or rises, the share price will likely roughly follow.Yet the fact that the Scottish Mortgage Trust share price is affected by such share price movements is actually positive in one way, as far as I am concerned. Most people in the UK have never heard of Meituan. If I was investing on my own I would not consider it as a choice.But SMT management has scouted out companies like Zoom and Meituan. And despite recent bumps, the portfolio returns overall have been strong. That is why the SMT share price is up 56% over a year and 326% over five years.My next moveGiven its exposure to tech stocks, I would not be surprised if the Scottish Mortgage Trust share price gyrates a bit more quite soon. The tech sector is going through some turbulence. Additionally, the company’s foreign holdings expose it to currency fluctuation risks.But with its diversified portfolio, I see SMT as an interesting way to get exposure to emerging companies. I will keep an eye on the share price in case it falls to what I regard as an attractive entry point. It is not there yet, however. Image source: Getty Images christopherruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.christopherruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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. Enter Your Email Addresscenter_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. 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