Prominent hedge fund managers and personalities in the investing community will at various times make the case for gold as an investment.
Sometimes the reason cited is technical in nature, the result of analyzing price charts. Others base their call on fundamentals such as inflation.
Aside from the fact that the argument for investing in gold is actually evergreen, it's refreshing when one of these thought leaders literally puts their money where their mouth is.
A Bold Move by a Billionaire Made Public
Naguib Sawiris is among Egypt's richest individuals, ranking second in the country. He is a well-known investor with ventures spread around the world. In fact, he comes from a family of successful investors: His younger brother is the wealthiest person in Egypt.
The elder Sawiris has a net worth of approximately $6 billion, and he has told multiple news outlets that he is investing half of that wealth in gold.
When a multi-billionaire talks about putting 50% of their net worth into gold bullion, people tend to listen!
Sawiris also holds large stakes in multiple major gold miners, Endeavour Mining and Evolution Mining.
Both Bloomberg News and MarketWatch (which is a subsidiary of the same company that owns the Wall Street Journal) reported that Sawiris is girding for a potential crash of the stock market, which he calls "overvalued."
This would be one more example of how owning gold is considered the best way to protect an investment portfolio from a steep decline in the value of stocks.
The Debate Over Leverage vs. Diversification
Naturally, amid the media attention, at least one columnist has voiced skepticism about Mr. Sawiris's strategy.
Barry Ritholtz of Ritholtz Wealth Management warns against trying to replicate this heavy weighting toward gold. He correctly suggests that concentrating investment into one asset or asset class goes against the tried-and-true idea of diversification. Understandably, the risk tolerance for a billionaire is not going to be the same as the average investor's acceptable risk profile.
Most fund managers recommend holding 5% to 10% of one's portfolio in gold.
Of course, there are two points worth making here:
- Notwithstanding the obvious benefits of a diversified portfolio, highly leveraged positions are how outsized returns are realized.
- When you still have almost $3 billion to "play with" if your big bet on gold somehow goes south, the calculus for an investor is much different than for you or me!
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.