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Investing in Gold Investment Funds by TrendFollower

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This week I received a letter from Fidelity advising me that one of my investment funds was closing which is the Barings Frontier Markets Fund. Now I used to invest in Merrill Lynch Gold & General which then turned into Blackrock Gold & General and JP Morgan Natural Resources. I sold them both a few years ago when Gold and Natural Resource companies were generally declining in price. 

However, I today switched my funds from Barings Frontier Markets Fund into Investec Global Gold Fund and will be adding per month using 'cost pound averaging'. Before deciding upon which Gold fund to switch to I came across many good ones on Fidelity's platform as below:

  • HC Chateris Gold and Precious Metals
  • Blackrock Gold & General 
  • Smith and Williamson Global Gold and Resources
  • Merian Gold and Silver Fund
  • Gold ETF's and Gold ETC's (Physical and Leveraged)

Now of course there are many different funds and investment trusts in relation to the asset Gold. The returns have been excellent recently. It is well documented in my posts that I am not a fan of Gold long term but during the short to medium term I see Gold as excellent addition to my investment portfolio just to add some defensive resilience to my investment portfolio in case things get ugly in the markets. It is sort of like an insurance policy if you like.

Now another reason I have gone for a Gold investment fund is that they invest in Gold mining companies (larger ones) but also junior ones. Now when Gold is in a bull market, gold mining companies offer a sort of leveraged bet on the price of Gold. They perform and deliver greater returns than Gold itself. I have experienced this many times in the past when I was a long term investor in Merrill Lynch and then Blackrock Gold & General and JP Morgan Natural Resources funds. So if Gold does perform like some of us are anticipating in the coming months and maybe the next year or two (remember bull markets can last longer than one thinks) then Gold investment funds should deliver greater returns than if one investing physically in Gold itself. This should enhance my returns for my investment performance. 

Now I totally accept that the closure of the Barings Frontier Markets Fund has forced my hand to switch that capital into another fund and hence has led to my investing in Investec Global Gold fund. Had the Barings fund not have closed then I most probably would not have invested in the Investec fund so that is some honesty from me. Also I am disclosing a real life investment switch that I have made and am openly sharing this with the IG Community. 

I am still trading Gold using IG's UK Spread Betting platform that those who are interested can view my Potential Long Gold Trade thread and the posts it contains. 

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There may be some of you who would rather invest directly in Gold mining companies. That is fine if you know what you are doing.

In my experience investing in Gold mining companies requires a lot of time and patience where as investments in Gold investment funds and trusts can reward investors in a shorter timeframe. The fund managers have access to data and material that the small investor just does not have and therefore the funds can identify better opportunities by conducting more effective due diligence. 


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If there is going to be a Gold bull run anytime soon then investors may wish to consider looking at their investment portfolio allocation in Gold and Precious Metals funds. 

Gold funds dazzle in list of 2019’s top performers


Of course I would not suggest investing large lump sums in case the Gold bull run does not materialise as one thinks. However, using the 'Pound Cost Averaging' approach and investing lump sums only on any major weakness, drops, and corrections may be a strategy investors wish to consider. 

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I am not investing in Gold because I believe in the asset longer term.

I am investing in Gold because I sense a bit of market turmoil with indices looking a bit 'toppy' and due a sharp correction at some point. I want to have exposure to Gold as a form of insurance in my investment portfolio but do not want to invest at the top of Gold's price. I want some capital appreciation for my efforts as ultimately I am a High Risk Capital Growth (HRCG) investor. 

This is why it makes sense to have a small allocation in your investment portfolio of Gold as a hedge against a drop in equities and turmoil in the markets and major economies. I am not suggesting a large allocation but certainly anywhere between 1% minimum to 10% maximum.

For those who are Gold bugs and pro Gold long term they may want up to 15% - 20% allocation in their investment portfolios but I am not one of these as I feel there are other assets which could easily outperform Gold. Just look at Japanese Smaller Companies, Bitcoin, US Small Caps, etc. These have all outperformed Gold with ease and could continue to do so over a 5 year, 10 year, 15 year and 20 year period but that is just my personal view. 


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Are there any investors who are currently investing in or are looking at investing in Gold funds in 2020?

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For those of who are Gold Bulls and think Gold is going to move higher may want to look at Gold investment funds which invest in Gold mining companies and will be a leveraged and high risk / high return play on Gold going up. 

These are getting hammered right now as the funds invest in the companies (shares) and equities have been decimated in recent weeks. This area is no exception. Should things settle and then reverse then this could be an attractive area to consider. 

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Some of these Gold mining companies are going surge if there are any supply issues. There are reports but I am not sure how accurate they are or in fact how credible. If true then it could cause Gold Investment Funds to surge.

I do not think there is any harm for long term investors to have a bit of insurance in their portfolios with small exposure to the likes of Gold and Bonds. Especially in times such as these. 


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