When the stock market is performing poorly, investors will often use gold to help diversify their portfolios. This is because the price of gold usually behaves differently to share prices.
The price of gold goes up and down depending on supply and demand, often moving in the opposite direction to shares. This means it can increase in price when shares fall and vice versa, but there’s no guarantee.
It’s one of the main reasons why during periods of economic stress, lots of investors see gold as a ‘safe haven’.
While the merits of gold as a diversifier are clear, it does come with its own risks. Prices can sometimes be volatile, affected by things like natural disasters, political tensions, or wider economic events like supply constraints.
We think it should only form a small part of a diversified portfolio. This is not personal advice, so if you're not sure if an investment is right for you, ask for financial advice. All investments and any income they produce can fall as well as rise in value, so you could get back less than you invest. Past performance isn’t a guide to the future.
3 fund ideas to invest in gold
Buying physical gold can be expensive and impractical for most. After all, you don’t want to store it under your mattress. But there are alternatives. Here are three fund ideas that invest in gold to consider.
Funds are an easy way to invest, though investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
An investment in a specialist area adds risk, so should only form a small part of a well-diversified portfolio.
Ninety One Global Gold
The Ninety One Global Gold fund aims to grow money over the long term by investing in companies around the world involved in gold mining. It also has a small amount invested in other precious metals, like silver and copper, and has the flexibility to invest in derivatives, which increases risk.
The fund has been run by industry veteran George Cheveley since April 2015. Cheveley has been working in the industry for over 30 years and is a specialist in metals and mining.
He believes investing in companies that can generate stronger return on capital over the long term, with a focus on environmental, social and governance factors, is key to outperforming commodity cycles over time.
As a result, the manager will steer towards investing in high-quality companies producing high and sustainable cashflows. They also need to have a difficult to replicate resource or competitive advantage, a high-quality management team, and resilient and sustainable business models.
As this is an offshore fund, you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme.
| 30/06/2018 To 30/06/2019 | 30/06/2019 To 30/06/2020 | 30/06/2020 To 30/06/2021 | 30/06/2021 To 30/06/2022 | 30/06/2022 To 30/06/2023 | |
|---|---|---|---|---|---|
| Ninety One Global Gold | 21.94% | 50.80% | -19.33% | -3.70% | 4.51% |
| IA Specialist | 7.09% | -3.43% | 19.12% | -6.89% | 6.29% |
Past performance isn’t a guide to the future. Source: Lipper IM, to 30/06/2023.
More about Ninety One Global Gold, including charges
Ninety One Global Gold Key Investor Information
Troy Trojan
If you want a fund that has some exposure to gold, but as part of a more diversified fund, this could be a good option.
Troy Trojan aims to grow investor’s money steadily over the long run. It tries to limit losses when markets fall, rather than trying to perform strongly at all times.
Gold typically makes up around 10% of the fund and is one of their four 'pillars’ of investments. The managers invest in both physical gold and gold-related investments like companies whose fortunes are strongly linked to the gold price.
While this fund isn’t specifically a gold fund, it does consistently provide meaningful exposure to it without having to invest in a specific gold fund. The managers will also change how much they invest in gold based on their level of conviction in the yellow metal compared to other asset classes.
While the fund contains a diverse range of investments, it’s concentrated. This approach means each investment can contribute significantly to overall returns, but it can increase risk. The fund can also invest in smaller companies, which adds risk.
| 30/06/2018 To 30/06/2019 | 30/06/2019 To 30/06/2020 | 30/06/2020 To 30/06/2021 | 30/06/2021 To 30/06/2022 | 30/06/2022 To 30/06/2023 | |
|---|---|---|---|---|---|
| Troy Trojan | 6.87% | 7.52% | 8.33% | 1.47% | 0.79% |
| UK Retail Price Index | 2.88% | 1.07% | 3.86% | 11.84% | 10.38% |
Past performance isn’t a guide to the future. Source: Lipper IM, to 30/06/2023.
More about Troy Trojan, including charges
Troy Trojan Key Investor Information
iShares Physical Gold ETC
Finally, investors can use an exchange traded commodity (ETC). These are a simpler and more convenient way for investors to access specialist areas like gold. These investments are bought and sold the same way as shares and aim to track the performance of the commodity.
Some ETCs invest in the physical commodity, where the manager handles transportation, insurance and storage costs. Others use derivative contracts to artificially replicate the performance of the commodity, without having to own it. This saves on costs, but it’s a higher-risk approach.
The iShares Physical Gold ETC tracks the gold spot price. This is the current price in the marketplace at which a given security, commodity or currency can be bought or sold for immediate delivery.
This ETC only accepts gold that meets The London Bullion Market Association (LBMA) Good Delivery rules. In-line with these rules, the bars also aim to comply with LBMA’s Responsible Sourcing Programme, making sure that 100% of the gold bullion backing the ETC is responsibly sourced.
BlackRock is currently the largest asset manager in the world and the iShares brand is BlackRock's family of index tracking and exchange-traded funds.
As the world's largest asset manager, and with lots of resource and knowledge under its belt, BlackRock aims to drive further development in this part of the investment market. Being such a large player in the index tracking arena gives BlackRock unique access to the marketplace, which can help reduce trading costs.
With an ongoing charge of 0.12%, it’s also competitively priced in the market versus its competitors. Part or all of the annual charge is taken from capital rather than income generated, increasing the potential for your investment’s capital value to be eroded. The annual charge to hold ETFs in the HL ISA or SIPP is 0.45% (capped at £45 p.a. in the ISA and £200 in the SIPP). Ensuring an ETF has a low charge is an important part of tracking the underlying index closely. As ETFs trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.
This ETC is concentrated. This approach means each investment can contribute significantly to overall returns, but it can increase risk. Also, as this is an offshore fund, you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme.
| 30/06/2018 To 30/06/2019 | 30/06/2019 To 30/06/2020 | 30/06/2020 To 30/06/2021 | 30/06/2021 To 30/06/2022 | 30/06/2022 To 30/06/2023 | |
|---|---|---|---|---|---|
| iShares Physical Gold ETC | 16.60% | 28.96% | -10.94% | 17.07% | 0.41% |
| LBMA Gold Price | 16.89% | 29.25% | -10.81% | 17.23% | 0.53% |
Past performance isn’t a guide to the future. Source: Lipper IM, to 30/06/2023.
More about iShares Physical Gold ETC, including charges
iShares Physical Gold ETC Key Investor Information
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Our fund research is for investors who understand the risks of investing and that investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.