Dhanteras 2024: How Much Should You Allocate To Gold In Portfolio? Here's What Experts Say

Gold has traditionally been considered a safe investment option. It offers broader stability to an investment portfolio, making it capable of handling market fluctuation, especially during times of instability. With Diwali 2024 festivities kicking in with Dhanteras today, there could be no better day to revisit your gold portfolio. So what size of the portfolio should one invest in gold?

According to Quantum AMC’s chief investment officer Chirag Mehta and Abans Holdings' chief executive officer Chintan Mehta, the sweet spot is between 15-20%.

Speaking to NDTV Profit, Chintan Mehta said that in the current financial situation, one's portfolio allocation to gold should not be less than 15 to 20%, for somebody who has a bias towards equities for wealth creation.

“In the current situation, I believe your portfolio allocation to gold should not be less than 15% to 20%, depending on the financial arrangements one has made. Gold has given good returns, which wasn’t the case initially. It serves as a hedge against other investments like equities and real estate," he said.

Chintan recommended 20% as a minimum requirement.

“In difficult years, gold will likely outperform, and even in normal years, given the current downward trend in interest rates, the real interest rates for gold will be positive. So, I would suggest a minimum of 20% investment in gold,” the Abans Holdings CEO added.

Quantum AMC’s Chirag Mehta discussed his company’s recent studies on the impact of adding gold to portfolios regarding returns and risk reduction.

“When we added gold, at a 15% allocation, there was minimal impact on overall portfolio returns, but risk reduction continued with every 5% addition. Thus, 15% is that sweet spot where you can enhance returns while still minimising the risk of the portfolio,” he said.

Chirag Mehta added that beyond 15%, while the risk is reduced, investors start compromising on the return potential of their overall portfolio.

Chintan Mehta said that gold addition to one’s portfolio provides a sense of stability.

“If you see the returns over a period of time in the equity index, it’s around 13% per annum since inception, while gold would be somewhere around 8% to 10%. But the comfort and solidity it provides is tremendous,” he said.

Commenting on what type of gold to invest in, Chintan Mehta noted that while physical gold is the choice for consumption in India, gold ETFs can maximise your return.

“ETFs are wonderful products that can be leveraged, allowing someone playing in derivatives to pledge these units for margin. So, for those wanting to leverage returns, can maximise by using ETFs and fund-of-funds or multi-asset funds. For consumption, physical gold is ideal; otherwise, paper products are the best options,” he said.

The price of gold in India on Tuesday stood at Rs 73,750 per 10 grams of 22-carat gold and Rs 80,450 for 10 grams of 24-carat variety of the precious metal.