“Every year we get some sort of market correction that throws everyone off balance. It certainly appears as if the market could be shifting in sentiment given the rise in bond yields and the sell-off we are seeing in tech focused names. Indeed, should this be a prolonged sell-off there will be some who will think that tech has had its day in the sun, at least for now.
“The key for investors is to block out the noise and remember your reasons for investing, but it is still worth keeping an eye on should we see a more sustained rotation to the more value orientated section of the market. Investors should also be mindful of portfolio balance, and not having all their eggs in one particular style or size basket. Despite the volatility, tech remains an important part of a portfolio given the trends seen since the pandemic, but this should serve as a reminder of the importance of being diversified.
“This correction will hurt some fund groups more than others. For example, Baillie Gifford has a high weighting towards growth and tech stocks, and thus will be going through a period of weak performance, albeit in many cases on the back of an extremely strong 2020. Indeed, we have seen its flagship investment trust, Scottish Mortgage, experience sharp share price falls over the past couple of days. This will cause many investors to begin to question these funds and if they still have a place within a portfolio as we emerge from the Covid pandemic.
“However, while this might be the start of a short-term dip for the likes of Baillie Gifford and the more growth focused managers, it could present an attractive entry point for investors. Given the falls experienced and the volatility it is showing, should Scottish Mortgage fall to a discount then investors should consider this a buying opportunity given the long-term track record the team has exhibited, as well as the quality of the portfolio.”