Why Invest in Gold?
- Gold serves as a hedge against inflation.
- It provides portfolio diversification.
- Historically, it has shown stable long-term returns.
How Much Gold Should You Hold?
- 15-20% of your portfolio is ideal.
- Studies indicate that including gold can enhance returns from 12.1% to 13.4%.
- Beyond 20% allocation, portfolio volatility increases.
Gold Investment Options
- Physical Gold
- Jewelry: High making charges (10%+), additional GST, and storage concerns.
- Bars/Coins: Lower making charges (~3-5%), but storage and security issues remain.
- Digital Gold
- Purchased through online platforms.
- Secure storage with insurance.
- Buying/selling includes commissions (~3-4%).
- Gold ETFs (Exchange Traded Funds)
- Trades like stocks on the exchange.
- Lower costs compared to physical gold.
- Requires a Demat account.
- Gold Mutual Funds
- No need for a Demat account.
- Managed by professionals.
- Slightly higher expense ratios compared to ETFs.
Best Gold ETF Selection Criteria
- Tracking Error: Should closely follow gold prices.
- Assets Under Management (AUM): Minimum ₹1,000 crore preferred for liquidity.
- Expense Ratio: Should be below the category average (0.62%).
Top Recommended Gold ETF
- ICICI Prudential Gold ETF
- Low tracking error.
- High AUM.
- Competitive expense ratio.
- Established track record.
Conclusion
- Gold should be part of your portfolio but not exceed 20% allocation.
- Choose between Gold ETFs or Gold Mutual Funds based on convenience.
- ICICI Prudential Gold ETF is currently a strong choice.
Disclaimer: This content is for educational purposes only and is not intended as financial or investment advice. Please consult a qualified financial professional before making any financial decisions.