Recently, I noted why I would use the current decline in the Scottish Mortgage Investment Trust (LSE: SMT) share price to buy a position in the stock.
Rather than buying the shares for my traditional dealing account, I want to add the investment to my Stocks and Shares ISA. I believe the tax benefits of this account provide the perfect wrapper in which to hold a growth-focused investment such as this.
Stocks and Shares ISA benefits
UK investors can save up to £20,000 a year in a Stocks and Shares ISA. They can acquire a range of investments with assets held inside one of these wrappers. However, the investments must be traded on a ‘recognised stock exchange‘. Put simply, this means any developed main market, including AIM.
Any capital gains or income earned on an investment held within an ISA is not liable for tax. I do not even have to declare the income on my tax return.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
One of the reasons I would buy the Scottish Mortgage Investment Trust is its focus on growth investments. The trust has a long track record of hunting for growth stocks and private companies. Some of these have been duds. Many have gone on to produce huge returns for the trust and its investors.
Scottish Mortgage Investment Trust potential
While I will not use past performance to estimate the trust’s future performance, I think its focus on growth investments could continue to produce significant capital returns. That is why I would hold the trust in my Stocks and Shares ISA over any other investment account.
The potential tax savings outweigh all other factors. Using an ISA also suggests I can reinvest the profits in other investments without having to worry about tax on these future holdings either.
Still, I am getting ahead of myself. There is no guarantee the Scottish Mortgage Investment Trust will produce positive returns. The trust could even inflict losses on my portfolio. Growth investing is notoriously risks. If the trust’s managers make a mistake, my hard-earned money is at stake.
Despite this risk, I think the firm’s exposure to fast-growing stocks in markets like China and the US put it in a great position to capitalise on the post-Covid economic recovery.
Organisations like ASML and Tesla have substantial competitive advantages, which should help them outperform rivals. Tesla is the world’s leading electric vehicle producer, and ASML designs and sells machines for producing microchips. It is the only company in the world with access to specific technologies.
I would like some exposure to these high-flying firms in my portfolio. I believe the Scottish Mortgage Investment Trust presents one of the best ways to do just that, especially when held in a Stocks and Shares ISA.
Rupert Hargreaves 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.
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