Investment in Gold, Gold ETF, Gold Fund, Sovereign Gold Bond to protect portfolio in events affecting globally like a pandemic caused by COVID 19

In past one year gold has delivered 50% return. As of recent gold fund assets have spiked, after many years of non satisfactory return.

Gold as a wealth creator. Comparison of 15 years rolling return of gold and multi cap fund reveals that equity fund consistently outperformed gold by a wide margin. The only exception is in a recent phase, i.e. 2020s first quarter, when there is a sharp fall in equity market is noticed, due to the global crisis of  pandemic caused by COVID-19.

Gold shines when equity loses luster. 

Rather than the much known say gold is safe haven, or gold acts as protector of value. It is noticed that almost in every case is gold shines. When equity loses luster. So, we can see that gold can act as a as an instrument against equity validity. comparative portfolio building One portfolio is build with 100% equity. Another portfolio is built with 80% equity and 20% gold. The third variety is 80% equity and 20% fixed income. Now, equity, with gold contributes safer return than hundred percent equity or equity and fixed income category. Actually, safer return in the sense of less volatility with less standard deviation. At the same time, it is to be noticed that the portfolio with equity will outperform in the phase when the equity market will recover in near future.

Should we invest in gold. Gold is an unproductive asset class, the value of which is mostly driven by belief, rather than economic science. Money that is invested in gold doesn't go to economic growth. But gold has repeatedly protected the downside in a situation when equity market is in contraction mode. So, small allocation to gold can help an anxious investor in the event of equity market fall.

Investing in ETF gold requires dmat account, and a trading account. Sovereign Gold Bond(SGB) can be purchased from Bank. Gold fund can be purchased as mutual fund. Sovereign Gold Bond carries 2.5% interest per annum. SGB has eight years of maturity and a premature exit is possible after 5 years.

Source of data: Mutual Fund Insight June 2020