GROW BEYOND GOLD

The rally in gold prices could allure investors, but staying diversified to create a well-balanced portfolio is the way to long-term growth.

- NAVEEN KUMAR

Gold has become red hot again. Globally, the yellow metal has hit a six-year high and gold stocks are soaring. In India, there has been a splendid recovery and a price surge of more than 23 per cent since January, the only bright spot in an otherwise gloomy state of affairs. Consider this: Equity benchmark BSE Sensex has corrected 3.4 per cent over the past one year (as on August 30). The highest interest rate offered by State Bank of India on fixed deposits is 6.5 per cent. And systematic investment plan (SIP), the safest route to invest in equities, is no longer immune to market mayhem. On an average, SIPs in large-cap funds have given a negative return of 1.56 per cent over the past one year, while mid-cap and small-cap funds have returned minus 11.16 per cent and 15.63 per cent, respectively. Understandably, people betting on debt and equity are getting hurt. Gold, on the other hand, has always been considered a safe investment during economic uncertainties. The current rally is encouraging people to invest more in this metal. Still, some are hesitating, given the high volatility in gold prices over the years. Should you go for portfolio reallocation, focussing more on gold and ditching investments in debt and equity markets? There is no easy way to optimise a portfolio, but a well-balanced investment strategy often helps.

Start with Review and Rebalance

Asset allocation is all about selecting a mix of investments for your portfolio to achieve financial goals, at a risk level you can tolerate. It is not a one-time undertaking, though, as asset classes frequently experience sharp upturns and downturns and percentage of portfolio allocated to that class is thrown off-kilter. That is why you need to review performance of assets from time to time and rebalance the portfolio to stay on course.