The Times - UK (2020-08-01)

the times | Saturday August 1 2020 1GM 61

Money

might not be too late to invest. There

could, however, be a sharp price fall if

more people start selling.

Mobeen Tahir from Wisdom Tree, an

investment company, said that the gold

price would fall if a vaccine were devel-

oped. “We hope for this scenario, but re-

main aware that a vaccine is likely to

take some time,” he said.

Wisdom Tree estimates that gold will

beat the S&P 500 index, a measure of

US stocks, by 55 per cent this year.

0 How to buy

One way is to buy physical gold. You

can order gold coins and bars online,

which you then have to keep safe, or

companies such as Bullion Vault can

store it on your behalf. You can also

invest in an exchange-traded fund,

which aims to track the price of gold,

usually by owning bullion.

Another way is to invest in compa-

nies that mine gold, although bear in

mind that the stock price will not neces-

sarily move in line with bullion — the

performance will depend on how the

company is running its business and

not just on demand for gold.

Gold miners can provide an income

through dividends and raise capital by

issuing more shares. However, the cost

of extracting gold can be high.

Jason Hollands from the wealth

manager Bestinvest says that gold

stocks have gone through a period of

underperformance against the gold

price, but that mining companies

shares have gone up almost 49 per cent

while bullion has grown 30 per cent.

Buying an actively managed fund

can be a good option for most people

because it allows a professional stock

picker to choose gold-related invest-

ments on your behalf. Yearsley likes the

C

anny savers have managed to

avoid interest rate cuts by using

regular saver accounts linked to

their bank or building society.

These are usually offered as standal-

one accounts or add-ons to a current

account and allow you to deposit a

maximum amount every month. Banks

will generally switch you into an instant

access acount once the year is up.

The best rates are paid by First

Direct, HSBC and M&S Bank, all of

which require you to have one of their

current accounts to access the deal.

First Direct offers 2.75 per cent on

deposits of between £25 and £300 a

month. If you put away the maximum

amount you would make nearly £54 in

a year.

M&S and HSBC also pay £2.75 per

cent, but deposits are capped at £250 a

month. This brings the amount you

could earn over the year down to just

under £45.

These accounts are the rare excep-

tion to sweeping rate cuts since the

Bank of England reduced its base rate

from 0.75 per cent at the beginning of

the year to a record low of 0.1 per cent.

The average rate for regular savers

available to new customers has

dropped from 1.73 per cent to 1.19 per

Merian Gold and Silver fund, which

invests in a mix of bullion and shares.

The $895 million fund has returned

53 per cent to investors over the past

year, compared with a 2.4 per cent loss

for the related Specialist sector.

Lowcock likes the Blackrock Gold

and General fund. “The manager, Evy

Hambro, is conscious of risk, so focuses

on companies with strong balance

sheets that are well managed. The fund

invests primarily in gold miners, but

will have exposure to other precious

metals and minerals.” The fund has

returned 51 per cent over the past year.

Source: BullionVault, Tilney/Lipper

Gold price during financial crises

Gold bullion v mining stocks

Percentage growth

$2,000

1,500

1,000

500

0

1980 1990 2000 2010 2020

60%

40

20

0

-20

-40

Jan Feb Mar Apr May Jun Jul

Recession Recession

London Gold

Bullion

MSCI gold miners

sector

How to beat paltry interest rates (for a year at least)

cent since January. Coventry Building

Society offers the best standalone regu-

lar saver at 1.85 per cent with a maxi-

mum deposit of £500 a month,

although you have to lock the money

away for a year or lose 30 days’ interest.

After a year, the account switches to an

instant-access savings account.

In January, the best rate was 2.5 per

cent from Yorkshire Building Society,

which was open to all savers.

“Like everything else, the rates on

offer are dropping,” said Anna Bowes,

the co-founder of Savings Champion,

an advice website.

“What’s interesting is that the very

best regular savers that you could only

open if you also hold a current account

with the same provider are still offering

the same rates.”

Five ways

to tell if

a company

is in trouble

T

he recent collapse of Wirecard,

a German payments group that

had a €1.9 billion hole in its

accounts, is a stark reminder that

former stock market favourites can

have feet of clay.

With state support for companies

around the globe at record levels

because of the pandemic, there is a risk

that many poor-quality companies are

being propped up with the good ones. It

can be difficult to assess how well a

company is performing, so with the

help of some experts, we have come up

with a list of warning signs.

Unhappy auditors

It was the fact that auditors at Wirecard

could not find the missing cash that

finally sounded alarm bells about the

company. Tim Bennett from Killik, a

wealth manager, said: “Investors rely

on auditors to flag trouble so watch out

for any signs that auditors are unhappy

and any hint that they may be consider-

ing amending, or worse still, ‘qualifying’

what is usually a short report.”

Profit warnings

Listed companies are expected to issue

forecasts and indicate when profits are

likely to disappoint, so pay attention to

statements about future profitability

and look at how often management

have missed estimates in the past. In

2018 Debenhams, the department store

chain, issued three profit warnings by

the end of June. Another followed in

March 2019, before it went into admin-

istration a month later.

Rob Burgeman from Brewin Dol-

phin, a wealth manager, said: “Profits

warnings are an obvious sign that a

company’s trading position has

worsened. Once one warning has been

issued, it’s common for others to follow

on quickly.”

Short-selling

When hedge funds or aggressive pri-

vate investors spot a weakness in a

company they may short-sell the

shares. This is a process where they

borrow shares in a company, sell them

and then buy them back at what they

hope will be a lower price.

If a stock suffers a sudden and

unexplained lurch downward, short

sellers may be at work and this can be

the canary in the coalmine that tells

you there is something wrong with a

company long before most people have

spotted a problem.

Too much debt

This can be a real killer but is often

overlooked, especially when interest

rates are at rock bottom levels, as they

are now. Bennett said: “Too much debt

may not be an obvious problem in

today’s low interest rate market, but it

may become one if rates start to rise.

Investors should watch a company’s

interest cover — the amount by which

profits or cashflow cover interest bills.”

Wobbles in the cash flow

This was a warning sign at Wirecard.

Bennett said: “Cash-flow volatility can

be a sign that management do not have

a grip on their core operations and will

struggle if liquidity suddenly dries up.”

Mark Atherton

€1.9bn

hole in Wirecard’s accounts

The best regular savers

Account Interest paid Monthly deposit

First Direct 2.75% £25-£300

HSBC 2.75% £25-£250

M&S Bank 2.75% £25-£250

Coventry Building Society 1.85% Up to £500

You can earn 2.75 per

cent on your money if

you save every month,

says Kate Palmer