How much Gold should you have in your portfolio?
Given that gold lends stability to the portfolio and acts as a hedge against inflation, it would always make sense to have some exposure to the metal. The question is, how much?
Although every individual's goals and needs will be different and, therefore, demand a suitable asset allocation strategy, experts believe the exposure to gold should be between 5% and 15% of the individual's portfolio. Swapnil Pawar, CIO, Karvy Private Wealth asserts, "It would be pointless to put less than 5% of the portfolio in gold while anything more than 15% would expose the investor to unnecessary risks."
Others agree. Vivek Rege, founder of VR Wealth Advisors says, "Gold will provide stability to the portfolio and can be used by investors to hedge their equity positions. Around 10-15% allocation towards gold is adequate."
Sumeet Vaid, managing director of Ffreedom Financial Planners, advises investors not to get carried away. With gold prices touching the roof, everybody's rushing to buy the metal, including those who don't have enough money to buy it. So, NBFCs are giving loans to buy gold. You make a down payment of 15-20%, while the balance is paid by the NBFC. It will hold the gold till you repay the entire money, along with interest.
Neat? We don't think so. Borrowing money to invest is never a good idea. Investors who take leveraged bets on gold may be taking a very high risk. If prices go down, you will be hit by a double whammy—the loss on gold as well as the interest payable on the loan.
Source: Economic Times
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