Last few decades or as we may call it, the past century has seen a drastic development in world economy and finance. Launching of equity market, ever improving banking systems, bond markets, insurance, mortgages followed by derivatives, mutual funds, currency markets has brought in a complete new era in the way world economics function.
Through these diversification the investors has got many high yielding and super high yielding instruments to invest. Especially the mutual funds concepts of SIP, SWP, power of compounding has investors lured in one direction. That is high yield, higher yield and higher yields, every investor seems busy calculating how soon their SIP will make them "Crorepati". By virtue of it, undoubtedly it is hand a down best product in the market to create long term wealth. But we need to continuously reiterate ourselves that financial planning is not only about money minting.
A health financial portfolio is proportionately diversified keeping in mind about the life goals and addressing emergencies. A portion of portfolio should be allocated for wealth creation, some portion for insuring against unforseen emergencies, some for socio-political emergencies. The personal emergencies could be covered by insurance, like medical, natural calamities etc. But we need understand that there are certain emergencies which doesn't come up in general discussion.
The emergencies like sovereign debt crisis, bank failures, inflation, deflation, depressions, a war. If we go back to history pages in gold, we will find that in these kind of emergency situation "gold" has often enjoyed a status of being reliable.
5 reasons we must hold gold.
1. It gives a hedge against inflation
2. In many economic cycles, gold gives better return than equities in short term
3. It is relatively independent class compared to other instruments
4. It is considered a reliable asset class, can be used for loan
5. Adding gold helps diversifying your portfolio, hence reducing risk
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10-15% investment in gold is ideal for an individual investor. Do check with your financial advisor before investing.