Why Gold Deserves a Spot in Your Portfolio: Enhancing Diversification Beyond All Country and S&P 500

Gold is trading at historically high levels

In 2025, stock markets are on a downward trend due to uncertainty caused by “Trump tariffs.” The USD/JPY exchange rate is also leaning towards yen appreciation, leading to asset declines for those investing in “All Country” or “S&P 500” through mutual funds.

The term “NISA stop-loss” is circulating on social media.

In August 2024, there was a major crash dubbed the ”Japanese Black Monday.”

Previously, investors paid little attention to their holdings because their assets were steadily growing. However, given the current market conditions, now is the time to reassess asset allocation and investment choices.

Amid this, gold is gaining attention as a means to enhance diversification benefits.

Gold funds and gold ETFs offer a convenient way to invest in gold through NISA.

Investing in gold increases resistance to market declines

Let’s first examine the price movements of gold since 2007.

To better understand its trends, we’ll compare it with stock market movements by including the S&P 500 index. For tracking gold prices, we’ll use the long-established gold ETF, SPDR Gold Shares (GLD).

The following chart indexes both assets to a base value of 100 as of January 3, 2007.

The areas circled in red indicate the movements following the “Lehman Shock” and the “COVID Shock.”

It can be observed that during downturns or correction phases in the stock market, gold prices tend to rise. If an investor holds 50% in the S&P 500 and 50% in gold, returns are still generated even during stock market crashes or corrections, and the overall price fluctuations become milder.

Additionally, since the above chart shows price movements in USD, it is also important to check how they have performed in JPY.

With the new NISA system, most investors in “All Country” (Orukan) or the S&P 500 are investing through mutual funds in JPY, so this trend might be more relevant.

 

 

[In JPY Terms] Trends in the Base Price of Gold and the S&P 500

We will examine the trends in the base prices of the Gold Fund and the S&P 500 Index Fund.

For the Gold Fund, we have selected the “Gold Fund (No Currency Hedge)” [Trust Fee: 0.407% per year], which has a relatively long track record. Its inception date is July 31, 2017.

For the S&P 500 Index Fund, we have chosen the “iShares U.S. Equity (S&P 500) Index Fund” [Trust Fee: 0.0938% per year], which was launched on September 3, 2013.

The following data is indexed to “100” as of July 31, 2017.

Both funds are influenced by USD/JPY exchange rate fluctuations, resulting in similar price movements. However, when observing the circled areas, we can see that they exhibit opposite trends. During stock market downturns, gold prices either rise or remain stable. Holding a 50/50 allocation helps smooth out fluctuations while maintaining an upward trajectory.

Stocks are essential for long-term wealth accumulation, but incorporating gold into your portfolio can enhance resilience against market crashes while boosting returns.

In the premium version of FRIDAY Subscription, we analyze and recommend specific low-cost gold funds and ETFs. We also compare USD vs. JPY investments, hedged vs. non-hedged options, and mutual funds vs. ETFs to help investors make informed choices.

[Detailed Analysis with Specific Fund Recommendations] Gold (Strong in Bear Markets) – Which Fund or ETF to Invest in via NISA?

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should make decisions at their own discretion and assume full responsibility for any financial outcomes. While data and stock prices have been reviewed by the editorial team, we recommend verifying them independently before making investment decisions.