3 ways I’m trying to protect my FTSE stock portfolio from rising geopolitical tensions
The world is becoming increasingly complicated for investors to navigate. With conflicts in the Middle East and Eastern Europe, along with international trade tariffs, FTSE stocks can end up caught in the middle. Although it’s impossible to predict the future, here are a few ways I’m looking to protect my portfolio at the moment.
Patience is a virtue
I try to invest some money in the stock market each month based on my personal cash flow for that period. Sometimes, it makes sense for me to invest everything right away. On other occasions, it’s more prudent to hold the fresh money as dry powder and be more selective. Right now, I think it pays to build up my cash allocation for the coming weeks.
This helps to protect my overall portfolio in case the market falls in the short term. The cash element can sit in my savings account. It can generate some positive return instead of being allocated to the stock market, which could fall. This patience helps my portfolio in the long term. After all, I can look to deploy the money in the future if I spot some undervalued options following any potential sell-off.
Looking for safe havens
Another option I’m looking at is increasing my allocation to safe-haven assets, such as gold. I can get exposure to gold in several ways. One is buying the physical metal. I can also decide to buy a mining stock that’s involved with the precious metal, such as Fresnillo.
I’m seriously considering a third option, which is the iShares Physical Gold ETC (LSE:SGLN). Over the past year, it’s up 39%. At its core, the UK-listed exchange-traded commodity gives investors exposure to the price of gold. It’s backed by physical gold bullion. Therefore, it offers me a simple, low-cost way to invest in gold without needing to own or store it myself.
Gold bars are held in London vaults, with each share representing a specific amount of gold. I like using this FTSE-listed option better than mining stocks as it’s a purer way of expressing my view of owning a safe-haven asset. After all, the share price of a mining stock is also impacted by other company-specific factors.
As a risk, gold is priced in US dollar terms, even though the stock is priced in British pounds. Therefore, movements in the currency markets can impact the overall investor return. If the pound strengtens against the dollar, the returns would decrease.
Avoiding active trading
It might sound odd that I can be protecting my portfolio by not actively buying and selling shares in the coming few days. Yet, being overactive can result in large transaction fees, which would eat into my returns. Further, the geopolitical situation can change very fast. Instead of trying to time movements perfectly and risk having large unrealised losses, I think being more selective in purchases is often the better play.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
