Gold is a favorite investment avenue for Indians. Be it a festival or any celebration, it seems incomplete without a gold purchase. And with Diwali just around the corner, the auspicious time to buy gold has reached its peak.
Sources in the World Gold Council told moneycontrol, "The business in jewellery stores has been booming in the last fortnight all across India. Even a so-called not-auspicious period like the Shraadh could not dampen the enthusiasm of the consumers. Now that the festive season is upon us, we see that gold should have a very good season this year."
The Indian consumers had held back their gold purchases in the first half of the year due to the huge fluctuations in the gold price. The recent fall in gold prices have seen consumers rush to jewellery stores as they see the prices to be an attractive bargain.
Attractive as it may seem, moneycontrol tries to find out whether gold is a good buy at these levels, and if you must buy gold how much do experts recommend.
Allocate not more than 10-15% of your portfolio to gold Zankhana Shah, a financial planner says, "The timing to buy gold is not important. What's important is how much you allocate. According to me, only 10-15% of your portfolio should be allocated to gold. If you already have that much, do not spend your money on gold anymore."
She adds further, "If there is any upcoming marriage, then you have no choice but to buy gold because then it is a necessity. However, if you want to buy gold because you have been doing so every Diwali, just buy it as a token. Looking at the aggressive growth of equities and also the inflation rate, gold is definitely not a very good investment option."
Gold is a preserver of value over time
The World Gold Council believes that as a global currency, an investment and simply a thing of beauty, gold has held an allure for thousands of years. "For an investor, that allure is largely to do with gold's proven ability to preserve value over time and be a good diversifier within a portfolio.
Even a small weighting of gold in an investment portfolio can help reduce overall risk."
Invest systematically in gold
Industry expert, Bhargav Vaidya points out that Indians do not look at gold as a one time investment; they have been looking at it as a long time religion. "Investing in gold every month through SIP (systematic investment planning) makes sense. Right now, the prices are good and one must buy it. Ideally, I recommend that if you are risk averse, allocate 15% of your portfolio to gold. Otherwise, only 5% of an individual portfolio should be allocated to gold."
Shah recommends that one must review and objectively analyse how gold can affect your total finances. If you are looking at gold from an investment point of view then buying gold bars is advisable.
Ask yourself these questions before buying gold:
- How much do I already have? (Ideally, your total gold holding must not be more than 10-15% of your portfolio)
- How is it supporting in overall diversifying of your portfolio risk and how much is it contributing returns?
- What is the focus of buying gold? Is it out of emotional attachment or your likings for it or you have accumulate gold for your child's wedding (which is a necessity)?
One has to keep in mind that although jewellery has a dual purpose of adornment and investment, it should always be there at least to safeguard us against the uncertainties of life.
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