by Mr. Srikanth Meenakshi, FundsIndia.com
Gold is a good investment instrument to bring
about asset class diversification in a investment portfolio.
However, it cannot be a sole holding in a
portfolio or even the principal holding. This is because over long terms, gold
has not performed nearly as well as equity market investments have. Gold has
done very well in the past 10 years - one of the best 10-year periods that it
has ever had as an investment option.
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| Srikanth Meenakshi, FundsIndia.com |
But, even including this period, the average
10 year rolling return of gold has been 12%. The same for an investment in the
Sensex has been 14% (rolling returns data calculated over the past 20 year
period).
So, it is very likely that your equity market
investments will handily outperform gold over the next 10 years.
It is for this reason that advisers counsel their
clients to use gold merely for diversification and hedging purposes in
long-term portfolios, and to restrict exposure to the metal to nearly 10% of
one’s investments. With these objectives, and within such a constraint, you can
include gold in your investment portfolio.
