Add Glitter to Your Portfolio

The love for gold among Indians is well-known. In fact, it is so very deeply weaved into our culture that irrespective of the prevailing price we continue to buy it. The lure for gold is such that in 2013 the then Finance Minister P Chidambaram appealed to citizens to resist the temptation of buying gold as large gold imports had been blamed for the widening current account deficit at that time. This attraction for gold is not unwarranted as historically the yellow metal has proved to be a good bet against inflation. What also makes gold a good investment option is its low correlation with other major asset classes such as equity and debt.

The best part is that there is a negative correlation between gold and equity so that when equity is under severe stress, gold becomes buoyant. We saw this during the financial crisis of 2007-08 and most recently in the ongoing corona virus-triggered pandemic. Therefore, gold makes a good portfolio diversifier. However, it should never exceed more than 10 per cent of your portfolio as returns from gold are not exceptional. There are various ways in which you can invest in gold now such as gold ETFs, gold mutual funds and sovereign gold bonds.

Our cover story this time provides in detail different ways in which you can invest in gold. This will help you select the route that best suits you. In one of our special reports we have done a deep dive into some of the most important risk matrices that should be used while selecting a mutual fund scheme. Return – that too historical return – is the primary tool considered by investors to zero in on the right mutual fund investment. Nevertheless, our study shows that if you can minimise your risk, returns will be taken care of. We see that funds with the best risk matrices also happen to be good performers in the long run. 

SHASHIKANT