There are many ways to earn a profit in the stock market (and an equal amount of ways to make a loss!). A favourite method among investors to earn passive income is by owning dividend shares.

With inflation and interest rates on the rise, the stock market is becoming increasingly volatile. For this reason, I am on the hunt for high-yielding, low-risk dividend stocks I can add to my portfolio.

By investing as little as £100 a month into these stocks, and reinvesting the dividends, I believe I could be making well over £10k a year by the time I retire. Here’s how I plan to do it.

The method

I am currently 21, so I would be looking to pay £100 a month for the next 30 years. A spare £100 may be hard to find, but for context, skipping a £3 morning coffee each day pretty much covers it!

The key here is to keep up my payments and reinvest my dividends. By reinvesting my dividends, I can benefit from compound interest. For instance, starting at £0, and by investing £100 a month for 30 years, I could end up with well over £400,000, assuming a 13% annual total return (dividends plus company growth).

Assuming the above growth rate, I would reach my £10k target by year 18.

The stocks

I want to be earning passive income, which means I need to pick high-yielding dividend stocks. The best companies to pick here are slow-growth, stalwart industry giants. These companies are the most likely to turn over regular dividends and keep producing cash flows. A small amount of industry research and checking historic dividend payments should help me here.

A method I would plan to use in order to minimise risk would be to diversify my portfolio. This means picking high-dividend stocks across separate industries. Therefore, if one sector underperforms, its losses may be made up for by growth in another sector.

With the macroeconomic outlook looking increasingly uncertain for the next few years, this could be an essential method to employ.

The risks

While this sounds great on paper, it is not a foolproof method. There is no way of predicting a stock’s future dividend payments or annual returns (if there was, we would all be rich!).

Events like the Covid-19 pandemic force companies to skip dividends and even stop paying them for long periods of time. For this reason, it might take me longer than 18 years to reach my goal of £10k in passive income.

However, by year 30, I am confident that I will be able to hit that goal, even if I have to make some minor changes to my dividend portfolio along the way.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.

The airline industry has had a tough time since the onset of the pandemic. With global airline traffic coming to a near standstill, much of the sector found itself plunged into heavy debt. This was the case for IAG (LSE: IAG), which saw its revenues collapse and debts mount. Since then, things have drastically improved. However, IAG shares are still down 33% year to date, and down 33% over a 12-month period. I am using this fall to load up on cheap shares!

Why the shares have crashed

Inflation has been wreaking havoc with markets, and rising interest rates are making things worse for stocks. This is because as rates rise, investors are able to earn a higher risk-free rate, and hence pull their money out of speculative assets like stocks.

In addition to this, rising inflation is fuelling a cost-of-living crisis. This has led to strikes across several industries, including the airline business. IAG has had to battle against this threat in recent months, and it seems to have tainted investors’ taste for the stock.

Ready to take flight

One of the reasons I think IAG shares look so enticing is due to their recent results. For the six months to 30 June 2022, the group turned a profit of €293m. For context, it reported a loss of almost €1bn in 2021, signaling a strong turn of events.

The group’s cash position also increased substantially. At just over €9bn, it marks a €1.2bn increase from December 2021 levels. While cash has been increasing, debts have also shrunk by around €700m. These factors have largely been driven by the increase in bookings for the second half of the year.

The increase in bookings is a wider point worth considering. IAG itself reported that passenger capacity rose to 78% of 2019 levels in Q2 2022, up from 65% in Q1. More widely, it is estimated that 3.5bn customers will board flights in 2022, up from 1.8bn in 2020. The increase in footfall should vastly improve the group’s top line and filter down into increasing profits.

The outlook of the group also remains largely positive. Operating profit is expected to be improved for Q3 2022 and the whole year is expected to be profitable. Net cash flow predictions also signal positivity.

Finally, at just 106p, I think the value of this company really shines through. Before the pandemic, the group’s stock was sitting comfortably above the 400p level. While past returns are not indicative of future performance, it does signal to me that investors have been willing to pay that much IAG. As passenger footfall increases, cash increases and debts fall, I don’t see any reason why investors wouldn’t pay that much again in the future.

The verdict

At 106p, I think the long-term value of the stock outweighs the shorter-term risks of strikes and inflation. At The Motley Fool, we are long-term investors, and as such, I am willing to look past the short-term issues that IAG may face and add a position to my portfolio at the current price.

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Dylan Hood 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.

Like most stocks, BT (LSE: BT-A) shares have fallen in 2022. Down 11% year to date, the stock has seen its valuation fall largely due to rising inflationary pressures. Over 12 months, the stock is down 9.8%.

Regardless of the falling share price, I think that now could be a great time for me to buy BT stock. Let’s take a closer look at why.

Great value

At its current share price, BT trades on a price-to-earnings (P/E) ratio of 12.1. Although slightly above the ‘good value’ barometer of 10, it seems like a reasonably cheap valuation. When looking at BT’s nearest competitor, Vodafone, which trades on a P/E ratio of over 20, I see even more value in BT.

In addition to its value, it currently has a meaty 5% dividend, which is comfortably above the FTSE 100 average of 4. This could be great for adding passive income to my portfolio and helping me hedge against inflation.

BT is a big name in the telecoms industry, which is deemed a ‘defensive’ one. What this means is that it tends to fare well in times of economic turbulence. This is because (pretty much) everyone needs broadband, so the demand is always there. Also, due to the large amounts of pre-existing infrastructure that telecoms firms have, there’s usually less of a need for huge ongoing capital expenditure, which would increase in price with rising inflation.

There have been multiple forecasts of the UK economy entering a recession. As the economic climate worsens, stocks like BT could be in a good spot to weather the storm.

Poor results

Yet its share price performance doesn’t reflect this. Another reason why the stock hasn’t performed well this year has been due to its Q1 23 results. It reported that revenue rose 1%, but profits fell over 10% compared to the year before. A large chunk of this drop came from the group’s enterprise division, which has been suffering due to rising inflation putting pressure on B2B sales.

BT shares are also facing pressure from strike action. The Communication Workers Union (CWU) has been in talks with BT for some time surrounding pay packages. The firm had made a series of offers to the CWU, all of which were refused. Further strike action is set to take place because of this.

Strike action puts it between a rock and a hard place. If it doesn’t increase pay, operations are hindered, results are tainted, and the stock goes down. However, as it employs roughly 100,000 people, increasing pay means millions in extra costs. With thin margins, this isn’t something it can afford.

The verdict

Overall, BT shares look like a solid buy to me, especially in the current uncertain macro climate. Yes, it reported poor results and is in a dispute over pay. However, I feel the value, dividend, and future outlook of the firm outweigh these risks. As such, I’m looking to load up on BT shares at 153p.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.

Scottish Mortgage Investment Trust (LSE: SMT) shares have fallen a whopping 36% so far in 2022. The main reason for the drop is rising inflation and subsequent interest rate hikes, which have weighed on stock market valuations. Over a 12-month period, the situation looks even bleaker, with the shares falling just under 40% in value. With inflation still on the rise, is now the time to buy this stock? Let’s find out.

A rocky road

Red hot inflation has been a key market trend in 2022. With UK inflation reaching 10.1% in July and predicted to rise to over 18% by January, the situation looks pretty grim. Interest rates have been hiked to 1.75% in the UK in an effort to curb rising prices. This is putting severe pressure on growth stock valuations, which is very bad news for Scottish Mortgage. This is because the trust’s holdings are primarily focused on exactly this type of asset.

For example, the trust’s top three holdings are Moderna (8.3%), Tesla (6.7%), and ASML (6.6%). All of these stocks fit into the high-growth stock category and have exhibited high volatility so far in 2022. As interest rates continue to rise, and markets become increasingly uncertain, Scottish Mortgage shares could be in for an ongoing bumpy ride.

Another reason why the shares have suffered is pressure from Chinese regulatory authorities on US-listed Chinese companies. This has sparked the threat of potential delisting, which has vastly reduced investor confidence. Companies like NIO (which makes up 2.9% of Scottish Mortgages portfolio) have seen their shares tank on the potential of being delisted from the NYSE.

Reasons I like the stock

So why do I like the trust? For starters, at 829p, the shares are much cheaper than they were a year ago. In addition to the lower price, I adopt a longer-term outlook when looking at shares. Baillie Giffords’s flagship trust looks to “add value over five-year time frames, preferably much longer”. So, maybe I should discount the upcoming short-term volatility and look further into the future. Although past returns are no indication of future performance, Scottish Mortgage’s 606% 10-year return – compared to a 231% return for its benchmark the FTSE All World Index – highlights the stellar management of the trust.

In addition to this, being an investment trust, it allows me access to a bundle of assets in different industries, all under one investment. This is great for reducing my portfolio’s risk level. It also allows me access to non-listed companies, like Elon Musk’s SpaceX, in which Scottish Mortgage owns a £430m stake.

Am I buying?

I think that in the short term, Scottish Mortgage shares could face more volatility. However, here at The Motley Fool, we’re long-term investors. I think that under £9, the investment trust shares could land me some healthy returns over a broader time horizon – say 10 years. For that reason, I’m seriously considering adding this stock to my portfolio at today’s price.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding and Tesla. 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.

2022 has been a year characterised by surging inflation. Caused by supply bottlenecks from Covid-19, ultra-low interest rates, and magnified by the Russia-Ukraine crisis, inflation reached 10.1% in the UK in July. Across the Atlantic, the situation was similar, with prices rising 8.7% year on year in July.

With inflation rising, central banks are hiking interest rates. This is placing big pressure on growth stock valuations, as people pull their money out of speculative assets. At historically low prices, I’m looking for bargain growth stocks that could land me some big returns in the future. Below are two stocks I currently have my eye on.  

NIO

NIO (NYSE: NIO) is a Chinese electric vehicle manufacturer. It had a standout year in 2020, when its shares climbed over 1,100%. However in 2022, things haven’t been as easy with the shares falling 40% year-to-date. Over 12 months, the shares are down 47%.

The reason I like the look of this stock is due to its remarkable results. In Q1, the firm saw its year-on-year deliveries rising by 29%, with revenues climbing by 24%. Although NIO is still loss-making, its losses shrank 10% compared with the previous quarter, which is a good sign. In 2021, revenues soared by over 122%!

NIO also boasts some market-leading tech when it comes to battery charging. Its cars feature unique battery swapping technology that can be applied in a matter of minutes. Being the only manufacturer to offer this service, I think the stock is well poised to capture market share.

Rolls-Royce

Rolls-Royce (LSE: RR) is a UK-based civil engineering and defence company. It was hit hard by the pandemic in March 2020 and recorded a hefty £4bn loss for that year. However, recently the firm reported a profit for the first time since then, signalling a strong recovery so far in 2022.

Rolls makes the majority of its money from servicing aeroplane engines. With global travel increasing, I think Rolls could be in a great spot for growth this year. In 2020, just 1.8bn travellers boarded planes. Fast forward to 2022, and it’s predicted that 3.5bn customers will board flights. This should help boost revenues so the group can keep delivering profits.

Rolls is also leading the stride in small-to-medium-sized nuclear reactor technology. It expects to receive clearance to roll out these reactors by 2024 and has already signed contracts with governments around the world to implement them.

The caveat

I think that both of these companies exhibit some great fundamentals. However, no matter how these firms perform over the coming year, rising inflation could continue to plague their stock prices. If this is the case, then they could fall even lower – regardless of their encouraging results. However, adopting a long-term view, I think these stocks could be great additions to my portfolio at their current prices.

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Dylan Hood 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.

Airline travel was decimated by the pandemic. Most of the market leaders saw their stock prices slump as flying hours decreased to near zero. easyJet (LSE: EZJ) was no different and saw its stock fall over 60% between February and March 2020.

In 2022, even though flying hours have drastically improved, easyJet shares are still down 41% year-to-date. Over a 12-month time span, the shares have fallen 47%. I think this could be a prime opportunity for me to buy the stock at a beaten-down discount. Let’s explore why.

Encouraging results

In easyJet’s Q3 2022 results, it reported some strong figures. Although the group posted a loss of £114m, it managed £1.7bn in revenue. For context, for the same period in 2021, group revenue was just £213m, highlighting the impressive recovery. Its losses also shrank by £200m from Q3 2021.

Aside from growing revenues, one of the most encouraging metrics I saw was the decrease in debts. The airline sector is notorious for being saddled with high levels of debt after the pandemic, with players like IAG still sitting on over £8.5bn in debt on its balance sheet. easyJet, however, has a modest £200m debt, down from £600m in Mach 2022. With interest rates on the rise, it’s very encouraging to see the group trimming its borrowings.

Global passenger traffic is also still recovering. The airline reported that it’s now operating at 87% of FY19 capacity, which is very reassuring. It’s expected that in 2022, over 3.5bn passengers will board flights, up from just 1.8bn in 2020. This should help easyJet increase its top-line revenues and drive itself back towards profitability.

Not out of the woods yet

There are still a few risks that easyJet must overcome. For starters, the Russia-Ukraine crisis has sent oil prices skyrocketing. Although easyJet has announced that it has 83% hedged fuel for Q4, rising costs are something it will have to contend with in the future. That’s especially so considering inflation is showing no signs of slowing down.

In addition to this, the cost-of-living crisis (also caused by red-hot inflation) means workers are taking strike action. The problem is that if easyJet doesn’t find extra cash for wages, then strikes will continue and operational efficiency will be greatly hindered. However, if it does agree even a small increase in wages, it will have to shell out millions in extra costs as it employs over 13,000 people.

Why I’m buying

For me, easyJet is a prime example of a good quality stock beaten down by Covid-19 and inflation-related market sentiment. It has decreasing debts, rising revenue, and passenger footfall is set to keep rising in the near future and beyond. All of these factors signify to me the stock could surge in the near future. Yes, rising costs still pose a risk, however, the hedged fuel serves to mitigate this in the short term. For those reasons, I’m looking at adding easyJet shares to my portfolio today.

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Dylan Hood 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.

It’s been a rocky road for Royal Mail (LSE: RMG) so far in 2022. Having fallen over 50% year to date, the stock currently sits at just 259p. This fall in share price movement and subsequent shrinking of its market cap pushed the company out of the FTSE 100 index in June this year. Broadening the horizon to a 12-month span, the shares have tanked 47%. So, with this in mind, is now the time to buy the shares? Or should I avoid adding this FTSE 250 UK courier to my portfolio?

Union action

One of the most pressing issues plaguing the group is the threat of strike action. Royal Mail has been in a long dispute with the Communication Workers Union (CWU) over pay. With no firm agreement reached, it was announced that Royal Mail workers would strike for four days in the next few weeks.

The strikes come after months of red-hot inflation, which most recently hit 10.1% in the UK in July. Rising prices are vastly outpacing wages and magnifying the cost-of-living crisis. It’s estimated that 115,000 workers will partake in the strike action, which will place momentous pressure on Royal Mail’s operations.

Disruption to operations is a short-term issue, but I still expect a big impact on the firm’s revenues. However, over the long term, it places even more pressure on the group to reform pay packages. Royal Mail currently employs around 180,000 staff. Even a small increase in wages would add millions in operating costs. The courier operates with slim 5% profit margins, so higher wage costs for it are a big issue.

Interest rate pressure

With inflation and interest rates on the rise, it has created a far from favourable market environment for Royal Mail. The group has high debts, low cash flow, and is loss-making. This makes it a pretty risky investment. As rates rise, people turn away from speculative assets like risky stocks and pour their money into safer ones. As rates continue to rise, this could put additional pressure on Royal Mail shares. Also, with over £900m net debts on its balance sheet, and those thin margins, rising rates are something the group simply cannot afford.  

A bargain buy?

One positive I see for Royal Mail shares is their cheap valuation. Currently trading on a price-to-earnings ratio of just 4, the stock looks astonishingly cheap – especially considering the FTSE 100 average P/E ratio of 14. In addition to this, it packs a meaty 6.4% dividend yield, which could be great for adding passive income to my portfolio and acting as an inflation hedge.

Yet while the shares are cheap and the dividend is high, there are too many red flags for me to buy this stock. Strike action poses a big threat to the firm’s income, as well as potentially forcing it to vastly increase its expenditure. Inflation and interest rates pose a similar threat. For those reasons, I won’t be buying any Royal Mail shares today.

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Dylan Hood 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.

Airline stocks were hit hard in 2020 with the onset of the Covid-19 pandemic. As flights ground to a halt, companies found themselves with no customers while still having to shell out millions each month in maintenance costs. The result of this was negative cash flows, growing debts, and crashing stock prices.

However, fast forward to 2022, and much of the lost flying time has been recouped. As people are free to travel again, I would expect airline stocks to be slowly climbing. Yet this hasn’t been the case. easyJet (LSE: EZJ), IAG (LSE: IAG), and Ryanair (NASDAQ: RYAA.Y) are down 40%, 33%, and 32% year to date respectively. Over a one-year span, the same stocks are down 49%, 35%, and 33%. So that being said, is now the time to buy back in?

Ready for take-off?

A big positive for airline stocks is the continuing increase in footfall. In 2019, just under 5bn people boarded flights. In 2020, this number fell all the way down to 1.8bn. However, in 2022, it’s forecast that just under 3.5bn customers will board flights, highlighting the impressive recovery. As this figure increases, it will help boost firms’ top lines, which I expect to be reflected in share prices.

Looking at company-specific results, I also see good news. IAG reported a profit for the three months to June 30 for the first time in two years. Ryanair posted a profit of £170m in its Q1 FY23 results too. Although easyJet recorded a loss of £110m for the same period, its revenues soared to £1.7bn, up from just £213m a year prior. In addition to this, its net debts shrank to just £200m, down from £600m in March 2022. These figures suggest to me the airline industry is in a more comfortable spot.

Not out of the woods yet

But there remain risks. A big threat that could continue to plague airlines is rising fuel costs. The Russia-Ukraine crisis sent the price of oil skyrocketing to over $120 per barrel. Currently sitting around the $100 mark, the price of jet fuel will inevitably have skyrocketed too, increasing operating costs and eating away at margins.

Another risk that airlines must overcome is rising inflation and how this is impacting workers’ wages. We’ve already been seeing union action regarding the erosion of pay in other travel industries. easyJet, Ryanair, and British Airways have all seen strikes this summer, and there’s no guarantee that these won’t continue.

Rising interest rates are also creating a harsh environment for stocks to thrive. I expect this bearish sentiment to be another reason why airline stocks have fallen.

Flying under the radar

Yet I think that airline stocks are back on the up. Shares have fallen due to rising fuel costs, the threat of industrial action, and the wider macroeconomy. However, with flight numbers rising, and industry leaders returning to profitability, I think now could be time to buy back in. As such, I’m looking at buying some UK airline stocks for my portfolio today.

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Dylan Hood 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.

2022 has been characterised by red hot inflation, rising interest rates, and falling markets. The world’s largest index, the S&P 500, has fallen 14% year to date. But before it rebounded in July, the shares reached a low of $3,636, marking a 23% year-to-date loss. Over the course of a year, the index has fallen 8%. Across the pond the situation isn’t nearly as bad, with the FTSE 100 down 0.01% for the year. But this still highlights its stagnant returns.

However, since July, things seemed to have been picking up. So, is now the right time to be investing in the stock market? Or should I be searching for safer ways to grow my capital? Let’s take a look.

The year so far

As mentioned, the reason markets have been suffering is tied to the macro economy. Inflation has been reaching record figures in the last few months, caused by a combination of supply bottlenecks, Covid-19 government intervention, and the Russia-Ukraine crisis. In July in the US, inflation reached 8.7%, and in the UK, it reached 10.1%.

The way that central banks are controlling this sky-high inflation is by raising interest rates. Both the UK and US have hiked their rates. When rates rise, people are more likely to keep hold of their money, as they can earn a higher risk-free rate. This deters them from buying speculative assets like stocks, and stock market valuations usually take a hit.

One of the main reasons that markets have rebounded since July, is the news that US month-on-month inflation fell between June and July. This signified that inflation was coming under control and seems to have restored investor confidence in markets and the wider economy.

However, things are far from plain sailing. Energy prices are still soaring, which is keeping inflation high, and putting pressure on businesses around the world. What’s more, Citi recently announced a forecast of 18% inflation in the UK by January. It also highlighted it expected an interest rate of between six and seven percent to be enforced to control this. If these figures are correct, the UK economy could plunge into recession.

Is now the time to invest?

The good news about the stock market is that there are shares that perform well during recessions and times of economic turmoil. ‘Defensive’ industries like supermarkets, telecoms, and high-dividend stocks are usually a good play, but still carry heightened risk.

As for myself, I’m on the lookout for bargain companies with established reputations. Stocks that are beaten down by negative market sentiment, but still have solid underlying fundamentals. Anything other than such stocks I’m going to steer well clear of. Although the markets have seen a slight rebound, there’s no telling how inflation and interest rates will develop over the remainder of this year. However, I still think that investing in stock is my best bet at building long-term wealth, and as such I will still be investing during this turbulent period.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Dylan Hood 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.

The story so far

To understand why the stock has fallen, we must cast our minds back to the height of the Covid-19 pandemic. In an effort to remedy the economic shutdown, central banks across the world poured billions into economies to keep them afloat. At the same time, the virus disrupted supply chains. This meant there was less supply, but people had more money (on a macro scale) to spend on the same goods. The result of this – rising prices.

Fast forward to 2022, and inflation has been reaching sky-high levels. To make things worse, the tragic Russia-Ukraine crisis has sent energy prices soaring, adding to inflationary pressures. Now central banks are faced with a new task: to slow down rising prices. They do this by increasing interest rates.

When interest rates increase, investors withdraw their money from higher-risk, speculative assets like growth stocks, and put them into safer assets. This is because they can earn a better risk-free rate. Interest rates in the UK and US have been on the rise recently, the former sitting at 1.75%.

Scottish Mortgage’s main holdings are exactly the type of stocks that are being negatively affected by this kind of market. For example, its top two holdings Moderna (8.3%) and Tesla (6.7%) have fallen 39% and 28% so far in 2022. Many analysts are predicting inflation to keep rising, which likely means that rates will too. If this does happen, it would be bad news for Scottish Mortgage shares.

A long-term play

Here at The Motley Fool, we are long-term investors. That means picking quality stocks and holding them for up to 10 years. Scottish Mortgage operates with the same thesis. It looks to “add value over five-year time frames, preferably much longer” and explicitly states that it doesn’t “add much more than anyone else in the short term”. So, perhaps I should be discounting the current volatility, and be operating with more of a long-term view, trusting the fund’s management.

I only have to check on the trust’s previous returns to see this management in action. Over the last five years it has returned 118%, and over the last 10 years, a whopping 606%. This vastly outperforms the FTSE All World Index, which is the stock’s benchmark.

Am I buying?

I’m not buying just yet though. I think in today’s macro climate, a growth-focused trust is too risky for me. However, I will be keeping this stock on my watch list as I think it could have the potential to yield some big returns over a 10-year span.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.