o3 BLOG | Investing

Volatile Market Investment Strategies

March 30, 2022

O3 Mining

Investment Strategies for Volatile Markets

Volatile Market Investment Strategies — Gold has proven to be a strategic hedge against inflation. While some may feel the urge to sell everything, investing a small amount in gold stocks or funds can be a valuable inflation hedge and portfolio diversifier, no matter what happens in the stock market. They can provide growth and value as defensive stocks when interest rate hikes, inflation, supply chain issues, COVID-19, and military tensions in Ukraine and Eastern Europe persist. Naturally, this may seem like extraneous circumstances for business conditions, but commodities such as gold and sectors like energy, finance, material, and REITs continue to yield strong earnings. And as investors flock to gold stocks when the dollar’s value falls against other currencies, the price of gold will continue to rise. 

To protect your assets from potential losses and profit from a volatile market, here are a few ways that you can reconsider your investment strategy and include gold stocks. 


Volatile Market Investment Strategies to Consider when Investing in Gold

There are several ways to invest in the gold market, and for most experienced investors, that means buying the physical commodity gold or buying a futures contract. Whether jewellery or bullion, buying physical gold means that the price will fluctuate. 

However, in times of political and economic uncertainty, owning gold means just that — you own it, it’s yours, and the price will increase over time. Buying stock in mining companies allows you to profit from the store’s speculation, where the factors above that sway prices would still apply. Because gold will always retain its value, it’s a safe way to avoid losses due to currency. 


Other Ways to Invest in Gold: 

Gold ETFs 

ETFs allow you to buy gold without having to worry about storing it. Often seen as a risk with buying physical gold, you’re susceptible to break-ins, robberies and other consequences and costs that don’t come with ETF funds. What’s more, ETFs perform in concert with gold prices. Available through indexes, ETFs are unlike mutual funds that only trade once a day after the market closes, and one ETF can hold various investments, such as stocks, commodities, or bonds. 

In volatile markets, gold ETFs are effective for diversification as they can give you exposure to a group of equities, market segments and stock options. There are also lower fees associated with them instead of actively managed mutual funds, and dividends of the companies in an open-ended ETF are reinvested immediately, which creates a dividend drag. Lastly, they can also be more tax-efficient than mutual funds. As passively managed portfolios, ETFs (and index funds) tend to realize fewer capital gains than actively managed mutual funds.


Gold Options

Gold futures can be traded as options contracts backed by physical gold. These options can also remove the inconvenience of owning physical gold, including storage, transaction fees and insurance. People who invest in gold through opportunities can net impressive gains. Still, they also risk significant losses, but experienced investors with an in-depth knowledge of the market(s) know how to navigate. That’s why gold mining stocks are the best for investors looking for a mix between the two. 


Gold Mining Stocks

Another way to profit from rising gold prices is to own shares in the mining companies that produce it. When projects transition from exploration to production, experienced investors with knowledge of the market use gold mining stocks as a potential windfall if a viable gold discovery is uncovered. To boot, as the price of gold rises, so will the miner’s profits, allowing a company to increase its output over a long-term period to produce discovery results. Stocks that have production revenue to fund exploration will be your best bet. 


Gold-centric Mutual Funds 

Gold-centric mutual funds offer investors a professionally managed portfolio of gold assets. Mutual funds can also be a great option if your goal is to mitigate risk and take a passive approach to your portfolio. There are numerous funds exposed to gold and the mining and resource sector. 


Bottom Line 

In volatile markets due to political and economic turbulence, combining gold stocks and physical gold is the best strategy for gold investment. Before making decisions, investors need to assess their investment knowledge and risk tolerance levels.








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