Our approach to investment management is based in evidence — we rely heavily on academic research to guide our decisions. That’s led us to favour a long-term strategy built around low-cost, highly diversified portfolios of equity and bond index funds, with an overweight position in smaller companies and value companies. We keep trading to a minimum to reduce costs and avoid unnecessary complexity. All the evidence tells us that this is the most effective way of building and sustaining long term wealth.
At present, gold is getting a lot of attention, especially with inflation concerns and a recent price rally. But when we look at the long-term data, gold’s performance tends to be short-lived and doesn’t stack up well against equities. It also doesn’t generate any cashflow, which makes it harder to justify as a core holding.
There are also practical concerns. Most people access gold through Exchange Trade Funds (ETFs), but that relies on trust — trust that the gold is actually there. And with far more paper claims than physical supply, there’s a real risk that many investors don’t truly own what they think they do. Holding physical gold is one solution, but it’s expensive and logistically difficult for most.
That said, it’s worth noting that through our globally diversified equity portfolio, we do hold shares in mining companies — and some of those companies do mine gold. So if the price of gold rises, that increase is likely to be reflected in the share prices of those businesses, which means we still benefit indirectly from movements in the gold market without holding the asset itself.
Finally, we need to consider future risks. There’s a huge amount of gold in the oceans and even in asteroids. If technology ever makes those sources accessible, it could flood the market and dramatically reduce gold’s value. So while we’re keeping an eye on developments, we don’t believe gold fits our strategy right now and ultimately, I think if we were to add gold to our portfolios we would increase risk for no real long term benefit. That said, we’re always reviewing the landscape and remain open to change if the evidence supports it.