Gold - how to give your portfolio exposure
Many investors see gold as a safe haven in times of financial uncertainty and with some economists predicting its price will stay high for several years, it seems gold is the only bull market at the moment.
The price of gold has had a rich run of performance, hitting repeated highs in September. With so much current confidence in the gold sector, how should investors give their portfolio exposure?
Nigel Walker of TQ Invest said: "Investors should not make the mistake of seeing gold as the security in their portfolio, it is not cash, pays no income and can be notoriously volatile.
"For these reasons, you should always limit exposure to gold and commodities to a very small portion of any portfolio, irrespective of how convinced you are that it will perform well.
"Investors looking for a fund with a strong gold holding may wish to consider First State Global Resources with a 26% holding in gold & precious metals. This Australian managed fund is well placed to exploit opportunities in the gold/commodity sectors. A well defined process, formulated over a number of years, combined with an investment process based upon company management meetings and site visits has worked very well. Typically there is an emphasis to larger companies with earnings certainty and which offer good liquidity, so if there is a need to sell there is a ready market in which to do so. The fund will often have in excess of 50% invested in just the top 10 stocks.
"More adventurous investors who are confident in gold's future performance may wish to consider Blackrock Gold & General- mainly invested in gold shares (with a token gold bullion holding) taking the overall gold exposure to over 85%. This fund dates back to the late 1980's and is now over £2.5billion in size, an indication of its popularity. The manager primarily seeks investments in gold companies with long-life assets and having the backing of a strong management team. Great emphasis is given to management meetings and regular contact with companies held in the portfolio. Generally the fund will hold around half of the portfolio in just the top 10 stocks."
The value of investments and the income from them can go down as well as up. Past performance should not be regarded as a guide to the future. The investments described may not be suitable for all recipients and this content does not constitute personalised investment advice. TQInvest can take no responsibility for investment decisions you may take. You should obtain full details and look at your own circumstances, objectives and attitude to risk before purchasing any investment.