ETF touts gold and other commodities as timely inflation hedges

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Portfolios must now include commodities, especially gold, at higher than normal percentages due to escalating inflation, according to Will Rhind, CEO of GraniteShares, an ETF provider that focuses on raw materials.

“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 commodity ETF, COMB, has returned 30% this year, while stocks and bonds have both posted losses of up to 17%. “It’s a huge difference,” he said.

“This is the investment industry and the time when advisors can show their worth and earn their fees,” Rhind said. “Hopefully they have educated their clients enough that they don’t panic,” but adjust their portfolios appropriately.

Based in New York, GraniteShares is focused on providing investors with alternative investment options with a suite of commodity-based ETFs. The company launched its first ETF in 2017 and now has $1.9 billion in assets under management. “We believe the future of investing lies in the nexus of alternative thinking, low fees and disruptive product structures.” says GraniteShares. The Company’s ETFs include 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, albeit rising, and the dollar is relatively weak. But the price of gold is falling from a high in 2020, when it ended 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 it’s still a good time to get into any commodity, including gold,” Rhind said. Gold and other commodities protect against volatility that can quickly send stocks and bonds tumbling. “For commodities, cycles can last for years because it takes time to process supply. It is believed that there are few, if any, diamond mines that can be opened,” he added.

“If investors weren’t holding commodities and were relying on stocks and bonds, they’ve been losing money recently,” Rhind said. “The 60/40 portfolio performed very poorly.”

Since GraniteShares provides ETFs for precious metals, investors can enter the gold market with minimal investment. “It’s 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 big impact on the portfolio, he said.

“I would say everyone should hold gold all the time. The important thing is to have some exposure,” he said.

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