Gold Won't be Much Use in the Apocalypse

Editor's Views: Which themes will dominate investing this year, why experience matters in fund management - and why gold may not be much at the end of the world

Holly Black 10 January, 2020 | 10:16AM

editor

The start of a new year is a time when many of us are full of grand plans and resolutions. We’re somehow managing to stick to Dry January, there’s still just about time to complete that tax return, and we can make grandiose investment predictions for the coming months knowing that we’ll have forgotten what they were by the end of the year, so won’t be worried that we got it entirely wrong.

While I’m not going to attempt to guess where the FTSE might finish the year or which companies might go belly up, I will predict three of the things investors will be talking about most in 2020:

The Hunt for Income

The cornerstone of many an investment portfolio, income is likely to remain centre stage for both retirees and those still in the accumulation stage of their investment journey. Yet it remains elusive. Interest rates are still at rock bottom and many of the most attractive dividend yields are barely covered, suggesting they could be due for a cut.

As investors struggle to navigate this landscape, fixed income ETFs are likely to continue gaining traction and alternatives such as renewable energy and infrastructure investment trusts will play an important role in diversifying portfolios.

Value

If the 2010s were the decade of growth, could the roaring 20s finally see a return to value? Certainly, unloved stocks started to rally at the end of 2019 as investors start to see light at the end of the Brexit tunnel. Soaring stock markets and overstretched share price valuations could encourage investors to brave some of the areas that are out of favour for no good reason. 

Going Green

The Climate Crisis dominates much of the news agenda at the moment, and vegan steak bakes dominate the rest of it. More people are going to start to realise that they can take action on the issues that are important to them through their investments. Whether it’s choosing a fund that taps into a specific theme or putting your money with an investment house that has a strong track record for voting at company AGMs, the rise and rise of sustainable investment can only continue. 

Another Item for the To-Do List

As if your new year to-do list wasn’t long enough (is it just me who has to renew a seemingly endless string of insurance policies in January?), this week we’ve added another factor you need to watch out for when picking a fund: how long has the manager been at the helm?

Many people probably don't even know the name of the manager running half of the funds in their portfolio. Which is absolutely crazy if you consider you're putting them in charge of your savings and relying on them for your future. Who your manager is and how long they've been in place is just as important as performance, investment style and the holdings in the portfolio because it is the manager who decides all that. 

If you're considering investing in a fund where the manager has only been in place a few months you should ask whether they have the expertise and experience to deserve your money. If a manager leaves a fund you hold after decades in the job, you should be wondering why. 

If you were having surgery or a tooth pulled or receiving financial advice, you'd likely choose someone who had been in the job for years rather than the new guy who had just pulled into the car park for the first time that day. Investing should be no different. 

Going for Gold

As tensions mounted between the US and Iran this week, the gold price has soared. People look for a safe, physical store of value at times of uncertainty, so they say. And while I can sort of see the logic in that, I have to wonder whether this flight to gold when things get hairy is just a bit antiquated.

At the heart to this strategy is the idea that if the world ends and we wind up in a post-apocalyptic sort of situation, you’ll have something valuable to trade. Well, these days, investing in gold means owning an ETF not having a load of gold bars under your bed. I’d argue that in an apocalypse, no one is going to want your exchange-traded fund – the internet is probably down. They also probably don’t want your gold bars, even if you did have them.

So, if you’re looking for tradeable goods it’s probably better to keep an extra bag of rice or potatoes in the cupboard. And if you’re looking for investments, it’s probably best to stick with shares and funds whose value you think will increase over time – barring an apocalypse, of course.

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.

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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