Investor Views: I’m Buying Bitcoin and Gold

Private investor Ali Rizvi has diversified into crypto-currency and taken a more diversified stance on equities

Emma Simon 1 November, 2018 | 10:07AM

bitcoin crypto currency diversification alternative investment

Private investor Ali Rizvi says he is concerned about economic storm clouds ahead, and has been looking to diversify his portfolio as a result.

Rizvi, who is in his late 20s, is worried about the uncertainty of Brexit, as well as the problem of global debt levels rising. Having been interested in markets from a young age, Rizvi has an extensive share portfolio and has been investing in property since he was 19.

But he is unsure about the short-term outlook for both. He says: “In times of uncertainty it’s very difficult to know how individual share prices will behave, so my personal stance is to spread the risk and diversify.”

As a result, Rizvi, who lives in North London, has taken profits from many of his shareholdings, and used this to reduce mortgage debt – citing the risk that interest rates could rise in the future.

He has also tried to diversify his shareholdings, selling positions in many smaller companies, including a number of retail stocks, and reinvesting this cash into ETFs.

Rizvi says: “ETFs seem a good and cost-effective way to achieve this diversification. My favourite is Vanguard’s S&P 500 at present. I’ve sold a number of smaller shares to increase my holding in this ETF.”

Rizvi has previously held stakes in companies like the fashion retailer Boohoo (BOO) as well as UK supermarkets like Tesco (TSCO) and Sainsbury (SBRY).

This Vanguard S&P ETF has a coveted Gold Rating from Morningstar, as well as a five-star rating, reflecting its strong outperformance in recent years.

Morningstar analyst Monika Dutt says: “Vanguard S&P 500 ETF is one of the best in its Morningstar Category. This exchange-traded fund offers broad and diversified exposure to U.S. large-cap stocks.

“Taking a passive approach to that asset class makes a lot of sense given the solid body of evidence showing that active managers struggle to consistently outperform a standard U.S. large-cap equity market benchmark.”

Stock Picks for Decent Dividends

However, Rizvi has not taken an entirely passive approach. He maintains shareholdings in larger companies that he says pay “decent dividends”. These include Standard Life Aberdeen (SLA), Talk Talk Telecom Group (TALK), and GlaxoSmithKline (GSK).

Morningstar analysts consider drugs manufacturer GlaxoSmithKline to be trading below its fair value estimate of £17.90 per share.

As one of the world’s largest pharmaceutical companies, GSK has used its vast resources to create the next generation of healthcare treatments.

The company’s innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in the opinion of Morningstar analysts, meaning it markets are reasonably well protected from competitors.

Diversifying into Gold and Crypto

As well as taking a more defensive stance with his share portfolio, Rizvi has also diversified into some new, and more alternative asset classes.

He explains: “I have diversified further into gold and crypto-currencies. At first I didn’t really understand the purpose of crypto currencies, but the price movements had become too attractive to ignore.”

Rizvi says he started researching this topic and decided there were a number of reasons to invest in these digital currencies. He says hopes they will also produce some hedge against inflation.

He says: “The pound is not a store of value and we have seen hyperinflation with traditional fiat currencies in many countries.

“We have digitalised most things that are valuable to us, as they become more convenient to store and easier to use. This includes photos, videos and documents. With crypto-currency we have managed to do this with money.”

Bitcoin is arguably the most well-known crypto currency and experience a significant rally last year, rising from just over £3,000 in October 2017 to more than £12,500 by January 2018.

However, by October 2018 it was down to just £4,700 again. Rizvi says: “What makes me bullish on bitcoin is that the bitcoin network is increasing in power significantly. I believe if the network and infrastructure is growing regardless of a slump in price, this shows there is certainly strong confidence in the system.”

However he adds that there are still “a lot of difficult problems to overcome” before this asset is widely adopted by the mainstream.

He adds: “I feel the next crypto bull run isn’t far away it simply needs a catalyst, whether that’s crisis driven or an ETF approval we will soon find out.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Boohoo Group PLC165.36 GBX-9.64-
GlaxoSmithKline PLC1,467.60 GBX-0.84
Sainsbury (J) PLC265.30 GBX-3.70
Standard Life Aberdeen PLC241.34 GBX-1.95-
TalkTalk Telecom Group PLC119.38 GBX2.04-
Tesco PLC190.25 GBX-1.37
Vanguard S&P 500 ETF49.15 USD-1.55

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk