Does that mean one should invest in gold? Here's what we suggest.
27-Dec-2022 •Chirag Madia
It's rare for gold funds to deliver double-digit returns in a calendar year. What's even rare is they outshine equity and debt funds.
The year 2022 is one of those rarities, a collector's edition.
In a year that has seen equity and debt constantly wrestle with high volatility, gold funds have gunned out 12.26 per cent returns as on December 14, 2022, nearly double the returns posted by large-cap (7.03 per cent) and mid-cap funds (6.48 per cent).
Reasons
You can see the high demand for the metal by looking at the amount of money pouring into gold ETFs. Gold funds have seen a net inflow of Rs 731.99 crore between January and November this year, with the highest flows recorded in April.
Our take
While high inflation and recessionary fears are real, gold can be a hedge (a cushion) against sharp market corrections.
That said, we at Value Research have never been a big advocate of investing in commodities such as gold because they are not a wealth-generating asset.
If you look at its past 10-year performance, the yellow metal has given an average return of just 4.5 per cent. To provide you with perspective, it would take 16 years to double your original investment if your money grew at a measly 4.5 per cent. Even safe varieties of debt funds like overnight funds and liquid funds have given returns in the range of 6-6.6 per cent in the last decade.
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