Diversification does not mean you should be buying every available investment for the sake of it
21-Aug-2015 •Research Desk
I am investing in Kotak Gold Fund since the last 4 years. The SIP amount under Gold fund is about 9% of my total monthly SIP. The rest is invested in Equity MFs. The allocation in Gold Fund will go down further since I am increasing my SIP amount in equities by 10% every year.
Due to fall in gold prices in the last few years, the returns are negative and getting worse day by day. Should I remain invested for diversity sake or should I redeem and exit?
- Nandan Kossambe
We don't advocate investing in gold. Gold is very different from other investments. For example, bonds pay you an interest. Stocks offer you a part ownership of of the company. The value of gold, on the other, is determined by its demand and supply. Sure, gold had a dream run in the backdrop of global economic turmoil in 2008. But that was an exceptional situation. We don't believe that diversification is about buying every available investments for the sake of diversification. It is more about optimising your portfolio to achieve your financial goals with some amount of stability.