With many stock markets sliding into negative territory investors are increasingly worried about the possibility of a downturn ahead. Yet, trying to predict when markets will turn and specifically which asset classes or sectors will perform best is incredibly difficult. Rather than trying to time markets, one way of preparing for increased market volatility and a potential market correction, is to focus on building diversified investment portfolios.
It is important for investors to spread risk across asset classes, geographies and investment styles to diversify across investments that tend not to experience losses at the same time. With interest rates rising in many developed economies, bonds have become a less reliable diversifier for equities and other risk assets. As investors grow more cautious, the role of alternative assets is especially important because they tend to be less correlated to the direction of equity markets.
Gold has tended to rise especially during times of crisis, countering the negative impact of equity markets’ dips. Aside from being a hedge against crisis, gold can be viewed as a long-term alternative strategic investment that not only helps to protect capital at times of market turbulence, but that can significantly improve the risk-reward profile of a multi asset portfolio. Historically, gold has in fact displayed a very low or negative correlation with major equity markets, thus showing great diversification benefits.
Finally, in addition to diversification and downside protection, a strategic allocation to gold can also potentially enhance long-term portfolio returns providing investors with the potential for positive return contribution. The Friends First Physical Gold Fund is a commodity fund that provides access to returns generated by the spot gold price. The spot price is the current market price at which an asset is bought or sold for immediate payment and delivery. The fund tracks the Deutsche Bank Physical Gold Exchange Traded Commodity Index and is backed by a direct investment in the underlying physical gold.
Our Physical Gold Fund is available across the Friends First suite of Pension, Approved Retirement Funds (ARF), Approved Minimum Retirement Funds (AMRF) and Savings and Investment products.