Chart of the Week – Gold

Welcome to the Chart of the Week.

This week’s chart highlights the performance of different markets over a series of calendar years. I’m guessing you have probably seen this chart before, and are wondering why I am highlighting it today.

Back in 1999, Gordon Brown started selling 56% of the UK’s gold reserves – at what turned out to be pretty close to the bottom of the market. He got it away at an average sales price of $276 an ounce. The price today is $2314.

UK equities have seen record outflow from retail investors over the last month. Ironically, UK equities are leading the way this quarter. This is why we thoroughly research, evidence and document all investment decisions fully.

We like the UK for several reasons, which would warrant a whole separate note.

If anything, this is a reminder of one of the core principles of investing: the benefits of diversification.

I’ve also seen that Warren Buffet has had his annual investor day this week, which reminds me of another principle of investing: the benefit of compounding your investment over time.

Here’s how it works: let’s say you invest a certain amount of money, and it grows. In the next period, you have the potential to see growth on your initial investment and on the gains that have been added to your account.

This process repeats over time, and as the investment and gains compound, your investment grows at an increasing rate.

The chart below illustrates how even modest investments can grow substantially over time with the power of compound interest.

Investing in a diversified multi-asset portfolio offers a range of benefits that cater to various investor goals and risk tolerances.

So, to close out today, here are some key advantages of multi-asset investing:

1. Risk Management: Diversification across multiple asset classes (such as stocks, bonds, commodities, etc.) helps spread risk. When one asset class underperforms, others may perform better, reducing overall portfolio volatility.
2. Stability in Volatile Markets: During periods of market turbulence, having exposure to a variety of assets can provide stability. Assets often behave differently under different market conditions, helping to cushion the impact of downturns.
3. Enhanced Return Potential: By investing in multiple asset classes, investors can potentially capture returns from various sources. When one asset class outperforms, it can offset underperformance in others, leading to more consistent returns over time.
4. Opportunity for Growth: Different asset classes have different growth characteristics. While some assets may offer steady income, others may provide capital appreciation potential. A diversified portfolio allows investors to participate in growth opportunities across various sectors and regions.
5. Tailored Risk-Return Profile: Multi-asset portfolios can be customised to match an investor’s risk tolerance, investment horizon, and financial goals. By blending assets with different risk-return profiles, investors can construct portfolios that align with their specific objectives.
6. Liquidity and Accessibility: Diversified multi-asset funds often provide liquidity and accessibility to investors. They can be easily bought and sold, offering flexibility to adapt to changing market conditions or individual financial circumstances.
7. Professional Management: Many diversified multi-asset funds are managed by experienced investment professionals, who actively monitor and adjust the portfolio allocations based on market conditions and investment objectives. This can help investors navigate complex markets more effectively.
8. Simplicity and Convenience: Investing in a single diversified multi-asset fund can simplify portfolio management for investors who may not have the time, expertise, or desire to construct and manage a diversified portfolio on their own.

Summer is finally here. Enjoy the rest of your week!

Takeaway: We are passionate about the benefits of multi-asset investing, and so should you be.

Did you know: Ofcom could ban social media for under-18s? Click here.

Marlborough Podcast: This week, we discuss earnings reports, inflation trends & economic optimism. Click here.

Marlborough Commentary: In our quarterly commentary, we cover market bubbles to the AI boom. Click here.

Marlborough Blog: Andrew Shaw, our Japanese analyst, unveils why we are overweight Japan. Click here.