Part 5 - Cash equivalents & gold

Cash and gold

This post is part of an 8-post series on the construction of my portfolio.

These asset classes are simple in my portfolio. And they should be.

Just a note. Keep in mind that gold is quite volatile and not a useful hedge against anything. Unlike cash equivalents, you might not be able to sell it at a good price at a time that you want. That is not to say that cash doesn’t have problems.

Ben Felix, someone I think is worth following, made a great video called The Biggest Myths in Personal Finance. Myths 7 and 8 explain that both cash and gold need to be handled with care.

As for gold. Take a look at the chart below that shows 12 recent months. Say you bought around the time the US and Israel attacked Iran (28th of February 2026). Now you look at June, just a couple of months later. You went down from around 4 500 all the way to around 3 750. A drop of almost 17%.

If you want to know more about gold, the World Gold Council has tons of interesting information. Recommended.

Let’s look at the products I use for cash equivalents and gold.

Cash equivalents - max 10%

I use this iShares fund as my workhorse:

Table: Selected ETF

The fund is big, simple and cheap. Plus it distributes quarterly. Perfect for what I want.

If you feel the need to keep some cash in USD, this is the fund I have used for that:

Table: Selected ETF

Both funds are focused on short-term bonds, but there are more differences aside from the currency.

• The JPMorgan USD Ultra-Short Income Active UCITS ETF (dist) is an actively managed ETF; the iShares EUR Ultrashort Bond UCITS is not.
• The JPM fund is trying to beat the returns of 3-month US government short bonds. It’s taking on corporate banking risk to try and give you a slightly better yield than you’d get from just buying regular government T-bills.

Personally, for my portfolio I keep 100% of my cash in the iShares ETF. The JPM ETF is definitely more speculative because of the currency risk.

An alternative for cash

Another fund I have used and might use again is this one:

Table: Selected ETF

While €STR funds like this one use a swap structure (they are synthetic), their backing by central bank deposit rates makes them an exception to my general preference for physical replication.

What I like about this fund is that it behaves like an actual savings account tied directly to the ECB euro short-term rate (€STR).

If you want to read a bit more about cash equivalents, check out this post on money market ETFs.

Gold - 5%

For gold you need an Exchange Traded Commodity (ETC). Sounds similar to an ETF, but an ETC is actually very different.

First thing to know is that an ETC is technically a “listed debt certificate”. This setup allows you to get exposure to a single commodity which traditional UCITS funds aren’t legally allowed to do. The ones that I use are physically-backed ETCs. This means the issuer of the debt certificate buys the actual gold and locks it away in a secure bank vault. For me, a must-have for this asset class.

These vaults are regularly inspected, and you can find them on the site of the asset manager. If you cannot, bad news.

Here is a fragment of such a report, documenting the results of an actual inspection. You can find the complete report and others here.

Secondly, gold is globally priced in US dollars. So as a European investor I face an exchange-rate risk. I can accept that risk or hedge it. For gold I personally hedge half. I use these two products for my gold investments.

Table: Selected ETCs

• A recurring theme: note the high cost of hedging Xtrackers Physical Gold EUR Hedged ETC. This makes the ETF almost 50bps higher than the unhedged version.

What is next?

That is it for product selection! This post concludes the setup of the portfolio. Now we can take a look at the complete result.