YOU DON’T NEED TO BUY A SAFE FULL OF BULLION
IF YOU think your portfolio could do with a golden sheen, there are several ways to invest.
The simplest to understand is to buy physical gold, in bars or coins. The downside of this is that you’ll either have to pay to store it or accept quite a hike in your home insurance to have an acceptable safe fitted. You’ll also incur costs if you buy and sell.
Alternatively, you could use an Exchange Traded Fund (ETF), which simply tracks the price of physical gold. Darius McDermott, managing director of fund research group FundCalibre suggests the iShares Physical Gold Fund for this purpose. It is backed by gold bullion and is up over 15 per cent over three years. The ongoing charge for holding this ETF is just 0.12 per cent.
Investing in gold mining companies is another option. You can do this via an ETF too, such as the VanEck Gold Miners ETF, up 2.4 per cent this year but down 8.2 per cent over three years. Or you can buy individual mining stocks such as Fresnillo or Barrick Gold (down 35 per cent and 3.4 per cent this year respectively). ‘Gold mining companies tend to work in difficult parts of the world and, almost inevitably, that incurs political risk, operational challenges, and more cost,’ warns Burgeman. Fresnillo’s underperformance is a case in point, with labour issues and regulatory changes in Mexico weighing on its share price.
However, Dzmitry Lipski, head of fund research at DIY platform Interactive Investor says that when the gold price rises, these mining firms can be a better option than the metal itself. ‘As the gold price appreciates, the mining company’s margins improve, so the potential return to investors likely goes up at a faster rate than the rise in gold,’ he explains.
Alternatively, you could choose an open-ended fund or investment trust that is exposed to the gold price, but has an active manager. Personal
Assets Trust, down 2.2 per cent so far this year, has nearly 11 per cent of its portfolio in gold bullion. James Carthew head of investment companies at fund specialist QuotedData, says that the trust is focused on growing money but also on not losing money when markets fall, and gold is used as a defensive play.
Wealth & Personal Finance
dmg media (UK)