Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.

RISING tensions at Ukraine’s borders caused more volatility in stock markets this week. Perhaps the worst case scenario for Ukraine is that an invasion takes place that sets a precedent for other military adventures at Russia’s borders.

Reports of some Russian troops pulling back from the Ukraine border provides hope the moment of greatest danger may have passed.  Investors can certainly expect geopolitics to impact their portfolios from time to time. Markets often fall in the face of perceived danger. Then they usually bounce back, as investors return their attentions to the fundamentals driving companies, markets and the world’s large economies.

Recent examples of geopolitical events that were shocking at the time include: North Korea’s missile tests over Japan in 2017; a US-Sino trade war in 2018; and Iran’s uranium enrichment programme a year after that.

Given that markets navigated all of these successfully in the end, it appears volatility in markets driven by geopolitical worries can provide investors with fruitful longer run opportunities.

This is particularly true for investors engaged in regular saving. Committing a set amount to stock market investments each month automatically means more shares or fund units get bought when markets have fallen.

Conversely, fewer shares or fund units are added to an investor’s portfolio after a rise. These two effects act to bring down an investor’s average buying price over time. It’s a simple but deceptively powerful investment tool.

Another useful measure is diversification, particularly where it entails adding assets that tend to behave defensively in times of market stress.

Gold has a long history of helping to cushion investors from unforeseen shocks. In 2020, it paid to have an investment in gold, as stock markets struggled to absorb the economic fallout from the pandemic.

This week, the gold price has been on the front foot once more, while remaining some 10% below the record highs it achieved two years ago¹. A holding of 5% or so in an otherwise well diversified portfolio is a reasonable rule of thumb.

Ukraine won’t be the last geopolitical event to upset markets.

However, investors can be prepared for risks like these through having a resilient investment portfolio that spreads risk. As ever, the aim is not to be derailed from participating in the long-term growth potential of stock markets by temporary shifts in sentiment.

The Ninety One Global Gold Fund – formerly the Investec Global Gold Fund – features on Fidelity’s Select 50 list of favourite funds. It’s also one of Tom Stevenson’s four Fund Picks for 2022.

This fund invests in a diverse portfolio of gold mining companies worldwide. It also has the flexibility to buy physical gold ETFs and shares in companies that mine for other precious metal. You can find out more in the video below.

1 kitco, 15.02.22

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. The Ninety One Global Gold Fund invests in overseas markets so the value of investments can be affected by changes in currency exchange rates. The fund invests in a relatively small number of companies so may carry more risk than funds that are more diversified. The fund also uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The fund has or is likely to have, high volatility owing to its portfolio composition or the portfolio management techniques. Select 50 is not a personal recommendation to buy or sell a fund. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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