Gold, Germany and the S&P 500: where to invest $5000 right now

Oninvest asked private wealth manager Vladimir Todres where he would invest $5000 now. In his opinion, forming an index fund of three stocks for such a small amount is a random way, even with fundamental and technical analysis. A person who is just starting to create his first portfolio and wants not to actively trade stocks but to invest for a period of a year or more, a different strategy would suit him. 

In lieu of purchasing shares of stock, the private wealth manager he proposed to divide the funds into three equal parts as follows.

Last year gold became the world's second most popular reserve asset after the dollar, according to the European Central Bank's 2024 report.  Gold's share of global central bank reserves was higher than that of the euro. The last time this happened was more than 40 years ago. In conditions of high volatility and high inflation, gold is almost universally a protective asset, confirms Vladimir Todres.

It offers two options for investing in this precious metal. 

The first is a gold metal account (XAU). It can be opened not everywhere, but in some jurisdictions, such as Switzerland, Luxembourg or Germany. With this method of investment, the investor does not physically have gold bars, it is a regular money account linked to the price of gold. Its plus point is its high liquidity. In addition, there is no need to transport and store the bars themselves. Also, a gold metal account in some countries is not subject to VAT, for example, in Switzerland. The main disadvantage is that metal accounts are less protected in case of bankruptcy of a bank: in this case, they will become part of the bankruptcy estate, which is claimed by all creditors.

The second way - you can buy a unit, for example, in iShares Physical Gold or Xetra-Gold, and also play on the increase in the price of metal. There are drawbacks here: you'll have to pay a commission to the fund manager. The holder can withdraw his unit at any time.

Gold price/US GDP is now at the level of 2012, when there was a quiet period, and it can be assumed that there is room for growth in the price of the metal, says Todres. This opinion is also held by UBS investment director Mark Hefele: he predicts that the price of the precious metal may rise to $3800 per ounce. On June 16, gold is trading around $3400. 

Todres suggested investing the second part of the money in a European ETF that follows the German DAX index. For a long time, this market has been undervalued compared to other leading global indexes. Even after the DAX is up 33% year-to-date, its P/E multiple (price-to-earnings ratio) is 18.58. The Nasdaq 100, for example, has a cap of 32.22, while the S&P 500 has a P/E of 24.46.    

Behind the DAX growth are expectations of promised government cash injections into the reindustrialization of Europe, especially Germany. Stronger investment in the defense industry is driving growth for key companies in the index. Todres believes that investing in iShares Core DAX -one of the leading and most liquid funds on the index-will provide broad diversification for a small portfolio. Since the beginning of the year, its quotations have grown by 17.8%. 

If this $5,000 is the first investment, it is hard to imagine a portfolio without a share of high-tech companies: it is they who set the pace of growth in the American market, Todres reminds us. That's why the remaining third of the money, in his opinion, should be invested in the S&P 500. Despite the fact that it includes the 500 largest public companies in the United States, in fact 34% of the value of the index S&P 500 was accounted for by the largest technology companies - the "Magnificent Seven". The index is up 10% for the year-to-date and 1.6% YTD (data as of the close of June 13). 

In this case, the iShares Core S&P 500 exchange-traded fund would be a good fit for investing in the index. From June 13, 2024 to June 13, 2025, it added just over 12%, up just over 2% YTD. In second place after IT in it is investment in the financial sector.

This approach, according to Vladimir Todres, allows even with a relatively small amount of $5000 to get reasonable diversification, protection from volatility and a chance for growth.

Advice from a tax professional may be required before investing in other jurisdictions due to the possibility of double taxation.

Not an investment recommendation.