Investors are scrambling to bump up the allocation of gold in their portfolio as prices of the yellow metal hit new highs.
The commodity's prices revisited the all-time high of Rs 89,450 in Delhi last week. Despite this notion, planners said that now might not be the right time to increase gold in one's portfolio.
Besides the sharp rise in prices being the primary reason, planners also cited uncertainty as one of the reasons. Financial planners break down the ideal amount of gold in a portfolio along with their top picks when it comes to holding the commodity.
Should Investors Increase Allocation?
With all the recent developments pushing the prices of the yellow metal higher, investors may have considered bumping up their allocation towards gold. But the soaring price of the commodity does not vouch for an increased allocation, according to financial planners.
"Soaring prices need not call for an increase. If we purely follow price, we are more likely to be wrong than right," Amol Joshi, founder of PlanRupee, said. "Like, mid and small caps have done wonderfully well in the past, but topping up that investment would have been a wrong call."
When the future trajectory is unclear, the best thing to do is sticking to your asset allocation. For investors who want to increase allocation, now is not the time, given the run-up in prices. The advice is to fill gaps in the portfolio and stick to the planned allocation towards the commodity, according to Joshi.
How Much Gold Should You Hold?
Financial planners recommend a steady portion of the core portfolio to go into gold. "I would say about 10% of your financial portfolio. Most families have gold that is for consumption," Joshi said.
Vinit Iyer, managing director of Prudeno Wealth Advisors, echoed the view. "Allocation should be at the 5% to 10% mark. Uncertainties have pushed gold prices higher along with central-bank buying. I don't think the prices will be that high as the uncertainties go down and prices should cool," Iyer said.
Investors can maintain their allocation and there is no need to increase the allocation at a higher price, he added.
Best Format To Hold Gold
For investors looking to add gold into their portfolio, the best format to add it in is via mutual funds.
"Definitely not digital gold as we like to stick with known and regulated products. One can choose gold funds and ETFs by fund houses. There is no harm in physical gold but it may not be treated as a financial investment as one never parts with it," Joshi said. He highlighted the fact that jewellery or heirloom form of gold might not translate to financial investments.
One also saves on making charges when investing via bars and coins. Despite this, gold ETFs are preferred as physical gold has a 3% goods and services tax and storage cost, Iyer added,
Mutual funds continue to be a better way since the next issue of sovereign gold bonds remains unannounced, according to the planners.
Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
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