Facebook TwitterLinkedInYoutubewhatsapp Start Planning for your Financial goals
Schedule Your Free Consultation
  • Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Holistic investment planners, financial planning Chennai, Private wealth management Chennai

Holistic investment planners, financial planning Chennai, Private wealth management Chennai

Financial Planning chennai India, Private wealth management chennai India, Investment Advisory India, Systematic Investment Plan, Mutual Fund SIP, Mutual Fund ELSS, Tax Saving scheme

  • Home
  • About Us
    • Who we are & What we do
    • Services
      • Financial Road Map
      • Retirement Roadmap
      • Asset Allocation Plan
      • Webinar
      • Money Management
      • Wealth Management
    • In the Media
    • Testimonials
    • What Makes Us Different
    • How we can help you
    • Specialties
    • Honors and Awards
    • Vision & Mission
  • Resources
    • Blog
    • Articles
    • Podcast
  • Ideal Client
  • Contact Us

Gold: As an Asset Class – What is the Role of Gold in your Portfolio?

by Holistic Leave a Comment | Filed Under: Asset Allocation, Gold-Investment

In India, physical gold is considered wealth & has a significant cultural value attached to it. Gold is also considered the safest investment option for decades.

But over the years, our definition of wealth accumulation is changing.

It is important to consider where buying gold stands.

  • How important is Gold as an asset class?
  • Does Gold hold the same investment value as it used to?
  • What role does gold play in your investment portfolio?
  • How much allocation does Gold need to have in your investment portfolio?

Today gold is seen as an investment beyond just buying ornaments or jewelry. The scope of gold investment has widened.

Nowadays, investors consider investing in gold for 3 primary reasons;

  • Portfolio Diversification
  • Inverse correlation between equity & gold
  • Hedge against inflation

In the modern world, many investment opportunities are available with the click of your mouse.

Does gold lost its sheen or continues to be a strong contender among the other financial & digital assets?

In this article, let us discuss the performance of gold in the long term & compare its returns with Equity Mutual funds.

Table of Contents:

1.) Performance of Gold

2.) Research Methodology

3.) Lump Sum return compared to Gold

4.) SIP return compared to Gold

5.) Is Gold important in your portfolio?

6.) How much Gold do you need to allocate in your Portfolio?

7.) Conclusion

Performance of Gold:

Why should you have gold in your investment portfolio?

Is Gold an investment asset or a fixed asset?

Is gold an asset class?

Before we go further on this topic, we must understand whether gold is an investment asset or not.

Gold can be classified into

  • High liquidity asset
  • Commodities and
  • Collectibles

So, here, where does the gold fit in your investment portfolio?

When you invest in gold, how do you classify it in your portfolio?

Historically gold has given positive returns in the long term, considering both good & bad times.

The price of gold in a short-term period would be in a fluctuating trend all through the years, but it has served as a safe haven for investors.

Watch, “Gold as an Investment” to understand gold for investment purposes – Watch here!

What is gold’s average return for the last 20 years?

The following graph indicates that the gold price is in a rising trend in the long run.

Source: gold price.org

Here the average gold price in 2003 is Rs. 570 per gram.

Now let us look at an example from the past track record to understand Gold’s volatility better.

Below is an annual return for the calendar year since 1991. In these 30 years, the average return is 9.8%.

From the record, it is evident Gold has been able to give an Inflation meeting return.

It is one of the reasons why investors consider gold to be a safe asset.

However, we need to consider one important question here;

  • Has it been able to give an Inflation beating return?

From the same past track record, you can also see that in the past 30 years, it has also given a negative return 7 times.

Even though its price fluctuates, it has been able to deliver a better return in a longer time frame.

Let us look at other factors to determine how better its return compare to inflation.

The following table depicts the annual return of gold in a particular year since 1991.

First, we looked into the price trend and then the annual return of gold in the calendar year to compare how its returns change year after year.

As an investor, we may need to look into the Compounded Annual Growth Rate (CAGR) for various periods.

The following is the CAGR for both short- & long-term periods for Gold.

Time period 1 year 2-year 3-year 5-year 10-year 15-year 20-year Since 1991
CAGR 3.96% -1.97% 8.00% 10.41% 4.20% 11.37% 11.68% 10.01%

During the last 2-year period, it has given a negative return.
What is the return on the long-term investment in gold?

In the longer time frame, the CAGR is more or less the same.

An average on gold CAGR in the last 10 year is 7.67%.

Gold CAGR for the last 15 year is 7.95%

This can be better understood with the above illustrative graph.

Research Methodology:

All the above figures & graphs show gold return for a particular period or the trend in general.

Now, to have a better understanding, we can assume investing a certain amount in lumpsum or SIP mode in gold.

So let us process this data for comparison.

Lump sum Return compared to Gold:

Let us assume an investment of Rs. 1 lakh is invested in Gold.

Similarly, the same amount of Rs. 1 lakh is invested in an equity fund on the same date, to better illustrate the comparison, we have chosen the Kotak Blue-chip fund.

Let us compare the CAGR for the above investment under various time periods ending on 31st Aug 2022.

The following table gives you the returns in terms of percentage for Gold & Equity Mutual funds.

Investment 5-years 7-years 10-years 15-years 20-years
Current value CAGR Current value CAGR Current value CAGR Current value CAGR Current value CAGR
Gold 1,61,285 10.03 1,80,176 8.77 1,45,141 3.8 4,96,247 11.27 7,59,804 10.91
Kotak Blue-chip Gr 1,76,960 12.09 2,28,042 12.49 3,82,742 14.36 4,78,760 11 31,03,734 19.18
NIFTY 100 TRI 1,84,130 12.98 2,46,774 13.76 3,97,316 14.79 4,94,264 11.24 24,22,850 17.68

What is the CAGR of gold in the last 20 years?

The 20- year CAGR for gold works out to be 10.91%, which is an inflation-meeting return.

Comparatively, the return on equity mutual fund scheme is on the higher side, which is 19.18%.

The returns delivered in an equity mutual fund in the same period as gold can be considered inflation-beating returns.

One more important point to be noted here is that there was a dip in returns in the 10-year gold return.

This shows the volatility of gold. It also demonstrates the risk in gold investments.

Watch, “Gold: As an Asset Class – What is the Role of Gold in your Portfolio?” – Watch here!

SIP Return compared to Gold:

Now let us calculate the figures for a SIP Investment. If someone does a regular investment in gold like the one, we do in a mutual fund scheme, then the value of a monthly investment of 10,000 would be as follows.

Years Investment
Gold Kotak Blue-Chip Gr
Current Value CAGR Current Value CAGR
5 Years 7,47,200 8.99% 8,82,917 15.94%
7 Years 11,51,494 9.06% 13,83,816 14.32%
10 Years 17,71,132 7.67% 24,54,220 13.91%
15 Years 33,61,591 7.95% 50,65,150 12.84%
20 Years 69,43,988 10.11% 1,18,70,520 14.79%

For comparison, a similar amount is invested in an equity mutual fund scheme. Here, SIP helps to achieve the Rupee cost-averaging strategy.

So, when we analyse the returns of gold under various time periods, it hovers around 7 – 9%.

Again, as seen in a lump sum investment, the returns are inflation meeting.

Comparatively, in the long run, however, equity mutual fund proves to be a better alternative.

As it can deliver you decent returns ranging from 12% to 15%

It can be considered inflation-beating returns compared to the returns we get by investing in Gold.

Is Gold important in your portfolio?

Why should you have gold in your investment portfolio?

The data from our above analysis helps us to understand that the gold market in India has witnessed a fall in prices intermittently.

It will not last long, as Gold has always proved to give a strong comeback.

The ‘golden question’ here is why one should hold gold in their portfolio.

Let us look at some of the reasons for the question why.

  • Gold acts as a safety net for investors at times of financial distress. You can either sell or pledge it in order to use its proceeds.
  • Gold is a highly liquid asset. Generally, it takes 2 – 3 business days to encash any other financial assets, but that is not the case with gold.
  • Unlike stocks and cryptocurrencies, there is no specialised knowledge required to buy gold. Also tracking the performance of your investments is mandatory in the case of equity-related investment whereas Gold is considered a traditional investment vehicle.
  • Indian investors prefer tangible assets to digital assets. Real estate comes in first place in tangible assets and gold comes next in line.
  • Due to the inverse correlation between gold & equity, it reduces the risk in your portfolio.
  • Gold reduces the volatility in a portfolio.
  • The above figures & graphs clearly depict that the return on gold is definitely an inflation-meeting return.
  • Gold is also considered a sign of wealth in India. Indians cherish wearing gold jewellery. Some investors try to accumulate gold over a period just to gift their children with gold jewellery on the occasion of their marriage.

You can invest in gold for safety, liquidity and as an easy asset to stay invested in.

But if you are looking for a way to accumulate wealth, Gold will be of little help in your investment portfolio as it will not help to create wealth.

You can avoid owning gold for this purpose.

How much Gold do you need to allocate in your Portfolio? 

Investing in gold can be inevitable for Indians, especially in physical form or paper form.

There is a plethora of options available to invest in gold including;

  • Coins
  • Gold ETF
  • Gold bond

If you want to hold gold in your portfolio, you can do it so in the form of paper gold (Sovereign Gold Bond).

Paper gold / Sovereign Gold Bond gives additional benefits like an added interest rate of a small percentage for you, which will increase over time you hold gold.

It will not be the case with physical gold.

Though the price of gold is volatile in the short run, the return is in an increasing trend in the long run.

The percentage allocation of gold in your portfolio depends on your financial goals & risk appetite. It would be beneficial only if you plan to hold your investment in gold for the long term.

Having 5% – 10% of assets in gold will ensure the safety of your portfolio. The range of 5% – 10% might seem larger.

The reason for that is that in the last segment, we pointed out that some may want to hold gold to show off their wealth or present it to their children.

For those investors, the higher side of allocation will work. An Investor, who considers gold as investment diversification can stick to the lower range.

Here are some gold investment -related questions that can help you understand on Gold Asset Class:

1. Is investing in Gold good or bad?

. As mentioned earlier it can give you an inflation meeting return. It has a high liquidity option and can help you to maintain your wealth. To grow your wealth and to get inflation beating return Gold will not help..

2. How should I purchase gold? In physical form or in digital form?

Honestly, it is up to your requirement. You can purchase gold in physical form if you are buying it for ornamental purposes. If you are planning to invest your money in gold, then you can choose digital form.

3. Is digital gold investment good or bad?

Compare to jewels or ornamentals buying a digital gold is a good option. By investing in digital gold, you can avoid loss of money while selling it. At the same time, there is no fear of theft.

4. How much gold asset allocation should you have in your portfolio?

It is better to have 5-10% of the gold asset class in your investment portfolio.

5. How much gold assets should you have in your retirement portfolio?

If you think, you need gold investment in your retirement portfolio, then it is better to have 5-10% of gold asset class in your retirement portfolio. However, it is better to consult your financial planner to know how much gold asset allocation you should have in your portfolio.

Watch, “Which one to choose? Gold or Other Investment?” – Watch here!

Conclusion:

Is investment in gold good or bad in India?

If you are an investor who doesn’t want to take investment risk and wants stability in your investment return, then Gold is a good investment for you.

Gold as an investment is a safe asset, but it will not give you any return on a regular basis. As a tangible asset, the return will be in the form of capital appreciation.

So, you can limit investing in gold to 5% – 10% depending on your individual need.

For investment purposes, as we have seen before paper gold will be a better fit in the long run.

However, if you want to earn a high return and don’t mind taking risks, then gold is not a good investment option for you.

If you are looking for other better investment avenues, you can choose to invest in Equity as;

  • It earns better returns in the long run.
  • It is tax efficient.
  • It also has a better compounding effect.

You can pack your portfolio with investments in Equity to generate inflation-beating returns as gold only delivers you returns that meet inflation but not beyond it.

This Investment strategy will help you to accumulate wealth in the long run.

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below.

Reader Interactions

Previous article: SBI Life Retire Smart Plus: ULIP Review– Is it Good or Bad?
Next article: Bajaj Allianz Life Guaranteed Income Goal: Review (2023) – Should you buy?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Client Login

Recent Posts

  • Unwrapping Mutual Funds: A Beginner’s Guide
  • LIC Bima Shree Review – Good or Bad Investment Option?
  • LIC New Money Back Policy 25-year Plan – Plan 921 Review: Good or Bad?
  • Tata Technologies IPO Review – Should You Invest?
  • LIC Jeevan Tarun Review – Good or Bad Investment Option?
Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

Google Reviews

Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

Footer

  • Articles
  • Gallery
  • Ideal Client
  • Jobs(Full Time)
  • Podcast
  • Services
  • Testimonials

Connect With Us

Holisticinvestment.in
10/15, Second Cross Street,
Seethammal Extn.,
Teynampet,
Chennai – 600 018,
INDIA.

Copyright © 2022. Holisticinvestment.in | All rights reserved.    Cared with ❤ by T-Square Cloud 1

×