What has been gold's performance compared to Indian equities over the last 20 years?

Over the past 20 years, gold has delivered a 17% CAGR in India, slightly surpassing the 13% CAGR of the Sensex and Nifty 50.

What is the general expert recommendation for gold allocation in an investment portfolio?

Most experts advise that an investor's exposure to gold should ideally not exceed 20% of their portfolio.

Why do experts suggest limiting gold allocation despite its strong historical returns?

Experts suggest limiting gold allocation to balance diversification benefits with the growth potential from equities and other productive assets, as increasing gold exposure may compromise long-term growth.

Home / Business and Economy / Gold Outshines Stocks: Should It Dominate Your Portfolio?

Gold Outshines Stocks: Should It Dominate Your Portfolio?

5 Feb

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Summary

Gold's 20-year CAGR in India has slightly surpassed equities.
Experts advise gold exposure should not exceed 20% of a portfolio.
Gold acts as a hedge against inflation and geopolitical risks.

Gold Outshines Stocks: Should It Dominate Your Portfolio?

Gold has delivered a remarkable 17% compound annual growth rate (CAGR) over the past two decades in India, slightly outperforming both the Sensex and Nifty 50, which saw 13% CAGR. Silver also posted an impressive 18% CAGR during the same period. This performance challenges conventional wisdom, which typically advises limiting gold exposure to 20% of an investment portfolio.

Traditionally, gold is seen as a hedge against inflation, currency volatility, and geopolitical risks, providing a cushion during uncertain economic times. However, a higher CAGR does not necessarily equate to better long-term wealth creation compared to equities. Factors like market volatility and the sustainability of current bullish trends for gold are crucial considerations.

Gold prices tend to rise during periods of geopolitical tension, elevated inflation, wars, and stock market downturns. The yellow metal's performance over the last 20 years was influenced by events such as the Global Financial Crisis of 2008, the Covid-19 pandemic, and the Russia-Ukraine war. While some experts remain bullish on gold's long-term prospects, recommending allocations above 20%, most suggest a prudent 10-20% exposure.