Long term investing – keep gold in portfolio mix

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Gold as an asset class is generally considered as a safe haven because its value generally does not fall during times of uncertainty in the market.

“Gold is a precious metal and as such its value is not influenced by the same factors that impact other asset classes. Gold could be held along with other asset classes such as equities, bonds, property and cash as a means of diversifying,” says Chantal Marx, FNB Securities Head of Research. 

Beyond just being a safe investment vehicle, gold also offers protection against a weakening local currency. For example, if you are invested in Krugerrands and the rand depreciates, you are protected against any losses because gold is US Dollar denominated, in essence its value increases when the rand falters.

Krugerrands protect the value of money because they are traded close to the bullion contained in the coin. However, like any other investment, it’s important to invest long-term in order to see favourable returns from your investment. The price of gold appreciates over time; therefore holding it for longer may be beneficial.

Marx says, “If you have a well-diversified portfolio, which includes gold, you will be buffered against adverse market movements because prices of different asset classes rarely move together. If for example, equity prices fall, bond prices may move up, property prices would not be impacted as much, and gold could end up being stable.”

“Through the FNB Share Investing platform, FNB has made it easy to invest in gold via its Online Banking or the FNB Banking App where prospective investors have an option to invest in gold by purchasing Krugerrands or through Exchange Traded Funds. However, it’s also important to seek advice regarding your exposure to gold so that you do not end up with an overly conservative portfolio,” she adds.

This is an opportunity for South Africans to look outside the normal investment vehicle and buy into something that is designed to preserve wealth. In a low growth economy, measured diversification could help you to stay on track towards realising your financial goals.

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About Author

Bontle Moeng is the Founder and Managing Director of BizNis Africa. Moeng has spent 15 years working in the digital and online media industry across Africa. She applied her trade at True Love magazine prior to discovering her passion for Investment news in key sectors across Africa. Moeng previously worked for ITWeb, Starfish Mobile Technologies, ITNewsAfrica, AVATAR Agency, eNitiate, Global Interface Consulting and Havas Johannesburg. Her primary focus is to provide solid and valuable content on investment opportunities for the ICT, Energy and Mining sectors across Africa. In addition, the online news publication assists global companies to expand their presence in Africa. Email: news@biznisafrica.co.za

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