Portfolios now need to include commodities, in particular gold, at higher percentages than normal because of the escalated inflation level, according to Will Rhind, CEO of GraniteShares, an ETF provider that focuses on commodities.
“Normally, investors should have 5% to 7% of their portfolios in gold and other commodities, but in this environment an investor could increase that to 10% to 25%,” Rhind said in an interview. Commodities are an effective hedge against inflation and the volatility of stocks and bonds, he said.
GraniteShares’ broad-based commodities ETF, COMB, has realized a 30% return rate this year, while stocks and bonds have both seen losses of as much as 17%. “That is a huge difference,” he said.
“This is the investment sector and the time that advisors can show their worth and earn their fees,” Rhind said. “Hopefully, they have educated their clients enough so the clients do not panic,” but adjust their portfolios appropriately.
Based in New York City, GraniteShares focuses on providing investors with alternative investment options with a suite of commodities-based ETFs. The firm launched its first ETF in 2017 and now has $1.9 billion in assets under management. “We believe the future of investing lies at the nexus of alternative thinking, low fees and disruptive product structures.” GraniteShares said. Included in the firm’s ETFs is a gold ETF, BAR. GraniteShares fees range from 17 basis points for BAR to 25 basis points for COMB and 50 basis points for a platinum-based ETF.
Gold has gained popularity among investors as interest rates remain relatively low, although rising, and the dollar is relatively weak. But the price of gold is coming down from a high in 2020, when it finished the year up 25%, according to the World Gold Council.
“If you look back to the 1970s, gold was the best performing asset class in the market, and now is still a good time to get into all commodities, including gold,” Rhind said. Gold and other commodities protect against the volatility that can quickly rock stocks and bonds. “For commodities, cycles can last years because it takes time to address the supply,” he added.
“If investors did not hold commodities, and relied on stocks and bonds, they lost money recently,” Rhind said. “The 60/40 portfolio has performed very poorly.”
Because GraniteShares provides ETFs for precious metals, investors can enter the gold market with a minimal investment. “It is all relative,” Rhind said. A wealthy investor would need a large investment in commodities to make a difference, but a less wealthy person could invest a few thousand and have a large impact on the portfolio, he said.
“I would argue everyone should hold some gold all the time. The important thing is to have some exposure,” he said.