Keep 10% In Gold And Avoid Long-Term Bonds - Frank Holmes
Editor's Note: View Kitco News' full 2018 outlook coverage
(Kitco News) - Known as a fan favorite, the Expert Series brings together well-known investors and Kitco regulars to find out where they will be putting their money in 2018.
This year, Kitco News asked experts where they would invest $100,000 next year and why.
2017 has been anything but boring with new assets like cryptocurrencies making waves in financial markets. What does 2018 have in store? Check out what the experts have to say!
PART V: Keep 10% In Gold And Avoid Long-Term Bonds - Frank Holmes
Expert: Frank Holmes
Claim to Fame: chief executive and chief investment officer at U.S. Global Investors.
The investment firm has an average of assets under management of $762 million.
1 – How would you invest $100k in 2018?
It’s important to understand that investing is never going to be one-size-fits-all. An investment of $100k can differ widely based on an individual’s risk tolerance, age, knowledge of the market and even their gender. Keeping these things in mind, I believe it would be prudent to start with a portfolio comprised of 10% in gold bullion and silver, and 10% in a gold royalty ETF like our U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU) that launched this year.
After that, 20% in short-term bonds, 1%in bitcoin, 1%in ethereum and the remainder in a combination of growth and value stocks.
2 – What will affect gold most in 2018?
Looking toward 2018, gold will continue to be largely affected by both the Fear Trade and the Love Trade. When I say “Fear Trade,” I am referring to real interest rates, particularly 2-year and 5-year government bonds, along with the direction of the U.S. dollar and continued geopolitical fears.
On the other hand, the “Love Trade,” which refers to the purchase of gold for cultural celebrations and weddings, particularly in “Chindia” – China and India – will continue to move the yellow metal too. This includes rising GDP per capita.
3 – What are the top 3 investments for 2018? Why?
My top three investments for 2018 start with GROW (a personal focus, of course), which is the ticker symbol for my company U.S. Global Investors.
I believe GROW is a smart play for those interested in cryptocurrencies and blockchain, particularly due to our strategic investment in HIVE Blockchain Technologies this year, which is listed in Toronto.
Airlines would be my next investment choice for 2018, and we offer the only airline-related ETF currently available to investors – the U.S. Global Jets ETF (JETS). Airline profits are projected to increase in 2018, with the strongest financial performance projected to be delivered by North American carriers.
Lastly, infrastructure stocks continue to be a boon because of fiscal policy by President Trump, so that could be a good choice in 2018. Military and cybersecurity stocks should also benefit from Trump’s policies.
4 – What 3 investments would you avoid in 2018 and why?
In 2018 I would avoid both long-term bonds and mortgages. The reason being that interest rates continue to rise, and ultimately that creates risk.
However, the biggest issue to avoid all together in the new year is ignoring your risk tolerance.
If you are not managing your expectations, and if you are not paying attention to your level of risk tolerance, then you are not making informed investment decisions.
5 – If you could describe 2017 in one word, what would it be?
Crowdfunding. I would also say cryptocurrencies, which is a subset of crowdfunding.
#6 – What is your outlook for bitcoin in 2018?
Based on Metcalfe’s Law, I believe bitcoin will continue to trade higher and higher. Metcalfe’s law says the value of a network is proportional to the square of the number of connected users of the system.
When you apply this to bitcoin or any cryptocurrency, I believe it demonstrates how they are here to stay and will continue to grow in price as interest grows.