Kamiya Jani | Moneycontrol.com
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 it's 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 consumer 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 atleast to safeguard us against the uncertainties of life.
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