ETF: Rhodium bonanza

In ETF Blog, Latestby Simon Brown

A 693% return in three years? Now that is an awesome return for the Standard Bank rhodium Exchange Traded Fund (ETFRHO). Even the last year this ETF has returned an impressive 130%. Staggering, considering that three years ago most of us had never heard of rhodium (it is a white metal, part of the platinum group of metals (PGMs)).

If you had a single use time machine going back three years, buying this ETF would certainly be a top consideration. But we don’t have any time machines.

Weekly chart ~ ETFRHO

Weekly chart ~ ETFRHO

What this return does inspire is lots of question about whether one should be buying it or not. The honest answer is I have no idea if rhodium can repeat that performance or if it has topped and is about to collapse in a heap like a Protea batting line-up.

So, I stay away.

What I do know is over time the global economy grows, share prices increase and a broad-based global ETF will move higher and create wealth.

Make no mistake — I wish for rhodium type returns, as does everybody. So, what one can do is slip a little bit of speculation into a long-term portfolio. In my grandfather’s day it was gold. Most investors put 2%-5% of their portfolio into that. It served them well for a while, but most of them forgot the golden rule – don’t forget to sell.

If you are going to put some speculation into your portfolio there are two very hard decisions you have to make.

  1. What to buy?
  2. When to sell?

The truth is both are very hard, so I mostly stay away. My ETF portfolio is boring and it is never going to do the returns as above. But what it will do is plug along making me richer — slowly, but surely.

If you do want to try and catch the next Rhodium, select carefully and decide on an exit strategy in advance. Both upside and downside. And keep it small.

Simon


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