(Updated August 5, 2022).
NQ minerals review – that will be the topic of today’s article.
If you have been proposed this investment, and you are looking for superior alternatives, you can email me (advice@adamfayed.com) or use the WhatsApp function below.
As NQ is now in administration, the advice is to stay away! What is more, if you currently have a policy with NQ inside of it, it is likely you have other high-risk assets, and I therefore suggest a portfolio review.
There have been some recent cases where I have been able to improve portfolio construction for clients.
Where are NQ mineral investments sold?
It is sold globally but is especially popular in some of the markets around the world with a lot of expats – such as the UAE, Qatar and Singapore.
It is typically sold on investment portfolios such as Custodian Life, TIPS, and others.
How does the investment work?
NQ is an Australian-based company. They produce metals including gold, zinc, and silver mines. They are listed in London.
Typically, people with money in NQ minerals are investing in it as part of a wider portfolio. It is quite common, therefore, to see people who only have 5%-20% of their entire portfolio in NQ. NQ pays 12% per annum, bi-annually, for a 5-year term.
These kinds of investments have became more popular in an era of 0% interest rates, and measly government bond yields.
What are the positives and negatives associated with the investment?
The main positives were (before the administration).
- The investment has now been around for a number of years and has delivered more than bank deposit rates. However, since first writing this article, they have gone into administration, showing some of the risks I highlighted have came to pass.
- It can act as a diversification tool in a wider portfolio. If you are invested 2% in NQ, that isn’t the same as having half of your portfolio in it.
The negatives are:
- The risks are high relative to the return. 12% per year sounds like a lot, but even a vanilla S&P500 fund has produced 10% per year for over a hundred years – albeit with huge volatility and some down years. The Nasdaq has produced about 12% per year since 1995 as well.
- Other investments, sometimes with the same or slightly higher returns, have lower risks. So, the risk-return ratio isn’t great.
- It is in a sector, minerals, which might be affected by climate change commitments.
- The five-year duration is an issue. If this was a two or even three-year product, the risks would be lower. A lot can change, and go wrong, in five years.
- It is an illiquid asset, and the “asset-backed” component doesn’t offer that much production. If something goes wrong, it is true that selling the assets could help to pay back investors, but that process isn’t guaranteed and could take a lot of time.
- The investor’s money is helping NQ grow. This is fine and normal – many firms do the same. However, given the risks and medium-term duration of the investment, it has to be remembered that if NQ could receive money from the bank at lower exchange rates, they would do so.
Is the fact that NQ is listed mean it is safer?
No, firms can often just pay to be listed. The fact it is listed, therefore, doesn’t make the investment any safer than if they didn’t list.
Conclusion
NQ Minerals hasn’t been a bad option for some clients, in very specific situations, down the years. This was the case until the firm went into administration.
It is for that reason that NQ has been attractive to investors looking for diversification away from a pure stock market portfolio, in an era of 0% interest rates.
With that being said, superior options exist for clients who are looking to achieve that. By far the biggest negative about NQ is the five-year duration.
If an investor has been able to buy in in the middle of the term, that has significantly reduced the risk, compared to staying in for half a decade.
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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
Further Reading
What are some good resources for beginner investors?
