Gold: The Evergreen Investment Every Portfolio Needs
14 Sep 2024 – New Delhi (Author : Alok Kumar is chief Investment Consultant of Investcraft)
When it comes to investing, it’s important to spread your money across different types of assets to reduce risk. While stocks, bonds, and real estate are common choices, there’s one asset that has been a trusted investment for thousands of years: gold. Here’s why gold should be a part of every investment portfolio and why it remains a solid choice.
1. Gold – A History of Stability
Gold has been valuable for thousands of years. Unlike money, which can lose value due to inflation, gold tends to keep its value over time. Because of its long history as a stable asset, gold is a safe place to invest, especially when other investments might be risky.
2. Protects Against Inflation
Inflation happens when prices go up and money loses its purchasing power. Gold can help protect your money from inflation. When prices rise and the value of cash goes down, gold usually maintains its value. By including gold in your investment mix, you can keep your wealth safe from inflation.
3. Diversification Benefits
Gold doesn’t always move in the same direction as stocks and bonds. When stock prices drop or the economy slows down, gold often does well. This makes gold a good way to balance out your investment risk. Adding gold to your portfolio can help make sure that you don’t lose too much if other investments aren’t performing well.
4. Safe Haven Asset
In times of trouble, like during financial crises or political instability, investors often turn to gold because it’s seen as a safe bet. Gold’s value often goes up when other investments are losing value. For example, during the 2008 financial crisis and the COVID-19 pandemic, gold prices went up as people looked for safe investments.
5. Easy to Buy and Sell
Gold is very easy to buy and sell. You can invest in gold through physical forms like coins or bars, or through gold exchange-traded funds (ETFs) and mining stocks. This means you can quickly get access to your investment when you need it. Plus, gold markets are active all over the world, making it easy to trade.
6. Long-Term Growth Potential
Gold doesn’t just offer stability; it also has the potential to grow over time. Its value can increase due to factors like higher demand for gold in technology and jewelry, as well as central banks buying gold. This growth potential makes gold a good long-term investment.
7. Tangible Asset
Gold is a physical asset that you can actually hold. This can feel more secure compared to digital or paper investments. Having physical gold can be reassuring, especially when there are doubts about other types of investments.
How Much Gold Should You Have?
How much gold to include in your portfolio depends on your personal financial goals and how much risk you’re comfortable with. A common recommendation is to invest between 15% and 25% of your portfolio in gold. This helps you take advantage of gold’s benefits while keeping your investments balanced.
Gold’s consistent value, protection against inflation, and ability to balance out other investments make it an important part of a well-rounded investment portfolio. Its role as a safe haven during tough times and its potential for long-term growth further highlight why gold is a smart choice. By including gold in your investment strategy, you’re choosing a time-tested asset that offers stability and peace of mind. So, as you plan your investments, consider making gold a key part of your strategy.
alok@investcraft.in
