With gold’s rise in the past 1.5 years, the precious metal could challenge the idea of a typical 60-40 stock/bond portfolio. Bonds’ share of the 40% allocation could be split in half with gold, thereby creating the idea of a 60/20/20 portfolio.
With tariff volatility and other factors pushing demand for gold as a safe haven asset, this could be set to continue. However, gold’s inclusion in a portfolio could extend beyond just serving as a defensive hedge against market fluctuations. As market uncertainty continues to loom over stocks and bonds, gold exposure is imperative.
“[Gold] is no longer merely a defensive store of value, but a dynamic, strategic tool for navigating complexity in the multi-asset space,” said Sayad Reteos Baronyan, director of multi-asset research, and Alex Nae, quantitative research analyst.
Both analysts staunchly supported the notion of a 60-20-20 portfolio. They noted that this allocation has outperformed the typical 60-40 portfolio the past 15 years. Since 2010, the 60-20-20 returned 7.5% along with a volatility of 8.55%. That accounts for a Sharpe ratio (risk-adjusted return measurement) of 0.38. Compare this to the traditional portfolio, which generated an annual return of 6.3% with volatility of 8.01%, resulting in a 0.28 Sharpe ratio.
“Though gold marginally increased overall volatility, it enhanced return efficiency, making it a valuable addition to multi-asset strategies in uncertain macro environments,” the analysts wrote.
“Exposure to gold in a multi-asset portfolio can enhance risk-adjusted returns, particularly in macro environments where the classic bond-equity hedge is less reliable,” they added. “In the multi-asset space—where macroeconomic uncertainty, deglobalization, and liquidity shifts increasingly challenge asset allocators—gold offers an alternative hedge, making it a proactive tool for navigating risk and capturing value across diverse regimes.”
2 Ideas for Gold Exposure
The next question: How does one get gold exposure? Sprott has a pair of ways for easy access: the Sprott Physical Gold Trust (PHYS) and the Sprott Gold Miners ETF (SGDM ). One fund offers gold bullion exposure while the other takes an indirect approach via gold miners.
PHYS offers pure-play gold exposure as well as the flexibility of converting fund shares into physical bullion. With exposure to PHYS shares, investors avoid the logistical challenges of storing gold safely. Alternatively, they can convert their shares to bullion if they want a more tangible investment feel.
As demand for gold rises, supportive services in the gold industry like mining can also exhibit bullishness. This is where a fund like SGDM offers gold mining exposure. Rather than choosing individual mining stocks, SGDM adds broad-based exposure to miners. That eschews the overconcentration risk inherent in shares of single companies.
SGDM seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large-cap gold companies that trade on Canadian and U.S. exchanges.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
An investor should consider the investment objectives, risks, charges, and expenses carefully before investing. To obtain a Prospectus, which contains this and other information, contact your financial professional or call 888.622.1813. Read the Prospectus carefully before investing, which can also be found by clicking one of the links below.
Past performance is no guarantee of future results. One cannot invest directly in an index.
Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
Sprott Asset Management USA, Inc. is the Investment Adviser to the ETFs. ALPS Distributors, Inc. is the Distributor for the ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc. or VettaFi.
Exchange Traded Funds (ETFs): SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM and SGDJ
