Hedging against the index
Both the First Eagle Gold Fund Class A (SGGDX) and its benchmark, the FTSE Gold Mines Index, have underperformed the S&P 500 over the year. Gold and gold-related funds serve as a potential hedge against the market’s ups and down. Such investments are not always made with the sole purpose of gaining profits.
The graph above compares the YTD (year-to-date) return performance of a combined portfolio of 20% of SGGDX and 80% of the S&P 500 (VFINX).
The inclusion of SGGDX affects the return performance of the S&P 500 index. SGGDX has managed a YTD return of -19.3%. The combined portfolio’s YTD return comes out to be lower than the S&P 500’s return of 1.1%. Some of the top holdings of SGGDX are Randgold Resources (GOLD), Agnico Eagle Mines (AEM), Thor Industries (THO), Royal Gold (RGLD), and Newmont Mining (NEM).
The commodity and the precious metal sector has been suffering due to the weak macroeconomic environment. Almost all stocks in the business of producing, mining or marketing precious metals are on a downward trend. Profits can be made during falling markets by using short sales or taking different derivative positions. alternative funds can also be used to hedge uncertain market risks. To know more about alternative funds, you can read our series on