How Much of Your Portfolio Should be Invested in Gold?

Investors are always looking for ways to optimize their portfolio with the right assets. But when you choose an asset like gold it’s important to get both the form and allocation right. To make your job a tad easier, we’ve compiled a list of general allocation estimates for gold. 

However, we highly recommend you consult a wealth coach before you invest in gold or any other asset. Every investor is unique and only a trained financial professional can tell you what’s best for your individual portfolio.  

How Much Of Your Portfolio Should Include Gold?

Gold is an asset that is inversely correlated with the market. It does well during economic slumps. This is why investors prefer to add gold to their portfolio - to hedge against inflation. 

Most estimates suggest that gold investments should make up only 5-10% of your portfolio and not more. This will ensure that your portfolio has room for other investments like mutual funds, stocks, P2P lending, etc.

There are other sites that may suggest more conservative, or aggressive allocation such as: 

a) 10-15% 

b) 15-25%

c) 30-50%

However, a one size fits all approach cannot be taken when purchasing gold or digital gold. Any investment you make should be based on your investment goals and risk appetite. Consulting a trained financial professional or advisor can help you understand your risk profile.

The Traditional Way Of Buying Gold

Physical gold is one of India’s favourite asset classes. It represented 48.2% of physical assets in India for FY2019. But with the advent of investment apps like Cube that simplify wealth creation, gold can be bought digitally.  

Buying jewellery, coins, and bars or Gold Savings Schemes are the traditional forms of investing in gold. But there are risks that come with this form of gold - fear of theft, storage concerns, and making charges. Moreover, physical gold can not generate passive income on top of the security concerns. However, there is an alternative.

Digital Gold: The New & Improved Way Of Buying Gold

The new-age way of investing in gold purely for profits includes digital gold, Gold ETFs, Sovereign Gold Bonds, and Gold mutual funds. These gold assets carry lower expenses than physical gold. 

Moreover, you don’t have to worry about storage or theft since the investment is in paper form. Learn more about digital gold by Safegold here. 

Paper Gold: The Alternative To Traditional Gold

Paper gold includes investment options like Exchange Traded Funds (ETFs), Sovereign Gold Bonds (SGBs). Both Gold ETFs and SGB invest in gold bullion. Gold ETFs can be bought and sold on the stock market while SGBs are sold via a subscription process by the RBI.

However, there are limited number of Gold ETFs and the subscription process for SGBs is subject to availability from time to time.

But gold can be one of the best investments you can make for diversifying your portfolio. Let’s look at the portfolio allocation for gold according to experts. 

Watch this video to learn more about building the perfect portfolio

Summary

Gold as an asset has its benefits. But it’s important to allocate gold in your portfolio based on your investment goals, risk appetite and other factors.

There are 2 routes you can take:

1. Allocate a portion of your portfolio in gold purely for profits and to hedge against inflation - digital gold, Gold ETFs, SGBs. 
2. Buy gold for profits, to hedge against inflation, and to physically own it - jewellery, coins and bars. 

Note:

Facts & figures are true as of 13-10-2021. All information mentioned is for educational purposes and relies on publicly available information. None of the information shared here is to be construed as investment advice. We strongly recommend you consult a Cube Wealth coach before investing your money in any stock, mutual fund. PMS or alternative asset.