With contemporary choices like ETFs and FoFs giving simple and affordable investment options, gold is a beneficial addition to portfolios, providing stability and protection against inflation and market volatility.
As a material store of value and a symbol of tradition, gold in the form of ornaments has been an integral component of Indian households for many years. However, there is a practical drawback to its cultural appeal: actual gold has to be stored safely, usually in lockers or at home, which leaves it vulnerable to theft and additional expenses like insurance.
It is time to reconsider how gold fits into our investing path in the complicated financial environment of today—beyond only as coins or decorations. Although stocks have historically been the best option for building wealth, the present state of the market necessitates a more balanced strategy. Gold may stabilize your portfolio by providing a safety net during volatile periods as well as a hedge against inflation.
Outperformance: Historically, gold has had a higher return to risk ratio and outperformed equities for the majority of the time periods shown below:
Gold has continuously outperformed a variety of asset types over the last 10 years, giving Indian investors a 15% compound annual return. Because it is resilient in times of crisis, whether it is the global financial crisis, pandemic fear, or geopolitical unrest, it is an attractive option to add volatility-free shares to the portfolio.
Modern gold investment choices such as Gold Exchange Traded Funds (ETFs) and Gold ETF Fund of Funds (FoFs) provide improved options for investors looking for a convenient, affordable, and liquid exposure to gold.
Fund of Funds and Gold ETFs: More intelligent investment strategies
Gold exchange-traded funds (ETFs) closely reflect the price of gold. All you need to invest in Gold ETFs is a trading account to make transactions and a demat account to keep the units.
Gold ETF Fund of Funds (FoFs): These funds allow investors to include gold exposure in their portfolios. Usually intended for individual investors without a trading or demat account, investors may also use SIPs, STPs, and, of course, lump sum transactions. Additionally, Gold FoFs remove administrative burdens and provide a smooth way to invest in gold. The days of fretting about costs, purity, or storage difficulties are over. You may own gold in a simple, transparent, and economical way using these digital channels without having to handle the item in person.
Gold: Your portfolio’s Laxmi
The argument for having gold in your portfolio is still strong as families pray for wealth during Laxmi Pooja on Dhanteras. Gold not only safeguards wealth but may also improve long-term returns while providing stability during market volatility, whether via ETFs or FoFs.
A timeless asset that unites tradition and contemporary financial acumen, gold remains the golden-edged ally of wealth development in today’s unpredictable investing environment.
Make prudent investments; gold is the bright spot on your path to wealth accumulation.
The author is the Baroda BNP Paribas Mutual Fund’s Chief Investment Officer for Fixed Income.