India is a gold loving nation. No matter how financially sound or tight you are – you must be having gold in your house. But not all of us really consider gold as an investment option. Experts say it is a ‘must-have’ in every well-diversified portfolio.
Here are the reasons Why Gold should be part of your portfolio:
Hedge against Inflation
Historically gold has been an excellent hedge against inflation, as its price rises with an increase in the cost of living. Though it is a volatile commodity in the short term, over the long term you can consider gold to be a hedge against inflation.
Gold considered one of the most reliable hedges against inflation.
It may or may not produce expected return certain times but what makes it a must-have in your portfolio, it has exceptional performance in the period of uncertainties.
The fundamental of diversification is putting investment instruments in your portfolio that are not closely correlated to each other. Due to gold’s low or negative correlation with asset classes like stock and other financial instruments, it serves as a very useful tool for diversification. Hence a properly diversified portfolio should combine gold with equity and debts to reduce the overall volatility and risk.
Goal specific gold
Indians have a deep affection for gold. Jewellery is an essential part of Indian culture and gold plays a critical role in it. There’s a saying in India –‘No Gold, no Wedding ’. So if you have any specific goals such as – you have to accumulate X grams of gold for your daughter’s marriage then you should start buying small amount regularly to reduce the burden of spending huge amount at once.
Gold performs exceptionally in a period of uncertainties and economic crisis.
Emergency Liquid Money
Gold is a high-quality liquid asset as it bears no credit risk and quickly turned into cash in emergency situations. Gold is truly an international currency that can be bought and sold practically anytime anywhere in the world.