Thursday, 5 August 2021

WisdomTree Precious Metals ETF - Portfolio Addition

This precious metals ETF (ticker PHPP) offers investors a simple and low cost way to hold a basket of precious metals in their portfolio. Each of the four metals - gold, silver, platinum and palladium - are secured by a physical allocation backed by HSBC bank who act as custodians. This means physical gold bars or silver etc. are stored  away in the treasury vaults of a trustee and this provides more security than collateralised ETCs or 'swaps'. It's an exchange traded commodities or ETC which works in a similar way to ETFs and is traded on the market in exactly the same way.

The Case for Gold

I must admit that I have never been a fan of holding gold in the past but obviously as a defensive asset it can provide stability when the markets are turbulent or there is global tensions rising. In the past, gold has proved to be a safe have during difficult times such as the financial crisis of 2008/09.

Also these metals provide a hedge against inflation. Unlike fiat currency such as the GDP or USD, you cannot 'print' more gold or silver - they cannot be inflated. Inflation is creeping up - currently 2.5% and forecast to rise to 4% next year here in the UK. Meanwhile the BofE base rate remains at an all-time low of 0.1%...something surely has to give.

Finally, these metals tend to be negatively correlated to other assets such as equities and bonds so this should provide some evening out and stability as one asset falls the other advances and vice versa.

I am starting to see more risks associated with the increased debt from government borrowing due to Covid - the government borrowed over £300bn in 2020/21 - the highest since WW2. Total government debt has risen 18% in the past year to £2.2 trillion (£1.87tr April 2020).

Then add to this record debt and rising inflation the huge risks associated with the climate crisis which our leaders seem incapable of getting to grips with. These are likely to impact negatively on the global markets over the coming years so it seems like a sensible precaution to try to protect some of the gains made over the last decade.


The fund has returned a total of 58.2% over the past 5 years which equates to an average annualised CAGR of 9.6%. The year-to-date however is just 0.7% so I am hoping there will be a little more to come over the rest of this year and beyond but the main aim is not to lose value during any downturn.

PHPP share price past year


Investing is mainly about risk and reward and of course asset allocation will play a big part in the success or otherwise of any strategy. Some will be happy to push the boat out for the potential of higher returns from equities. Others will prefer the slow and steady game with a good balance of diverse assets in the mix. There is no right or wrong approach and much will be down to each individuals tolerance for volatility and of course time frame.

For me, at this point I am starting to see more downside in the future and will be looking to reduce the risks associated with equities and look at a range of safer options.

The purchase price earlier this week was at £112.50 and the fund will form a part of my defensive allocation which includes bonds and which together account for 10% of my portfolio. I would expect this to build up to 20% to 25% over the coming months.

As ever, this article is merely a record of my personal investment decisions and take on the risk/rewards associated with the current markets. It should not be regarded as an endorsement or recommendation - always DYOR!


  1. Hello. I really appreciate your blog - a well written, engaging source of useful ideas and informaion. Thank you.
    I hold SGLN, a gold ETF. What was behind your choice of a mixed metals ETC?

  2. Thanks...appreciate the appreciation!

    I am not so confident in this area so I am hedging my bets with the more diversified metals. I think the non-gold have more industrial uses and may well be required in the technology used in the climate change transition.

    The 3 yr returns for PHPP are 60% compared to just under 40% for the pure gold ETF. However I may well add the iShares fund at some future time.