I maintain positions in gold and silver through ETFs. But I have mixed-up reasons. I buy them as they are not correlated to equity, from a diversification standpoint and as they are ETFs, they also give me a chance to book profits from time to time. For pure diversification, with no expectation of return, as equity allocation gets bigger, with time, I prefer physical gold. And as silver is more volatile than gold.
GOLDBEES and SILVERBEES are very liquid, didn’t compare the expense ratios of these with other ETFs.
Gold has its proponents, it does have some value in the broad context of asset classes and financial products; its connection to USD and the movement of USDINR. We may have some views and insights as per its history and historical performance and our own experiences, but we have no control over its price, its value keeps on changing, as we know.
So just like hunting for value/bargains, we can look at gold too, from diversification standpoint alone, as it may not yield any return in the period we hold for, and it can even go down. So if we don’t expect any return and are even willing to take some loss, we can allocate to gold, and the allocation can depend on the capital allocated to equity or the volatility of the equity holdings or the possible loss in the equity PF, which if happens can make gold go up. If the allocation is considerable, and if it does not move for extended periods, it will be good if we don’t think about the opportunity cost.
Some points may have lost validity due to time or some changes, but these are worth reading.
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