The gold price has seen an impressive rise since late last year. As I write, its price is 12% more than where it started the year. It’s not hard to see why. Investors flock to gold during bad times, and the current times are nothing if not bad.
The Covid-19-driven crisis has taken its toll on not just health but also the global economy. Incoming data on the economy looks awful, and we haven’t seen the worst yet. It’s tempting to invest £1,000 in gold right now.
Comparing gold and FTSE 100
But here’s the rub. The FTSE 100 index has actually seen a sharper rise since it touched its lowest point. From 23 March to the time of writing, the FTSE 100 has risen by more than 23%. In other words, if I had invested in gold at the start of the year, I’d be sitting on 11% gains. But if I had invested in the FTSE 100 index or carefully chosen constituent companies, my gains would be much better.
The point I’m trying to make here is this. A stock market crash is an opportunity for investors for swift capital appreciation. It’s true that if I had invested in FTSE 100 at the start of 2020 and held on to it, I’d be sitting on a loss right now and gold would seem like a better bet. But even here, I reckon that as the global recession wears off over time, gold might not seem like the best investing avenue. Indeed, there are already signs that it could have peaked. FTSE 100 shares can be a far more promising investment, whether I’m looking to invest £1,000 or any other amount.
How I’d invest £1,000 now
Having established that the FTSE 100 index can indeed be a better bet, the next question is, which shares should I invest in? That depends on my risk appetite. If I can stomach some risk or if I’d like to invest £1,000 for the first time ever as a young investor, I’d look at cyclical stocks. These include airlines, tourism, and entertainment companies which have really gotten the worst of the recession. However, the well-run among them can recover sharply, even if it doesn’t look like it right now.
If, however, I’d like to invest £1,000 with a lower risk profile, I’d look at FTSE 100 companies that have been least affected by the recession. Healthcare and pharmaceutical companies are good growth stocks to consider among this set. Utilities are good to consider from the perspective of income investing. If I’m middle-aged, a combination portfolio of both high and low risk stocks is a good idea. There are various ways to invest in FTSE 100 shares to suit our individual investing goals.