How much gold should be part of your investment portfolio?
We all know that investment in Gold is the safe investment option. Investment in gold has given 20% annualized returns in the last 5 years. But the question is how much gold should be part of our investment portfolio?
How we invest in gold?
Though there are various ways to invest in gold, we can classify them broadly under two categories. First is investment in physical gold either in gold bars or gold ornaments. Second is investment in e-gold through Gold ETF or Gold mutual funds.
How much gold should be part of your investment portfolio?
We can answer this question by looking at the objective of the investment in gold.
- Investment in gold for long term investment objective: If you are looking for long term appreciation, my suggestion would be to invest 10% to 20% of your investment portfolio in gold.
- Why only up to 20%: As we know the famous rule, do not put all eggs in one basket, we need to diversify our investments into 4 to 5 categories. The maximum you can try to put in one basket should not exceed 20%.
- Advantages of diversification: When you invest in gold for 20% of your portfolio and balance 80% in 3 to 4 other investment options, you are diversifying your investments. In future let us assume that you investments in gold would have yielded 25% annualized returns and other options have yielded 30%, your overall returns would be still above 25%. On a negative side, let us say gold rates has fallen and you could get only 10% annualized returns, and since you are able to get higher returns in other investment options, your overall returns would be still higher than 10%.
- Investment in gold by accumulating over a period of time for daughter’s marriage: If your objective is accumulating gold for daughter’s marriage, you need to know how much you need to invest now regularly to meet the goal. For e.g. your daughter is 10 years old now and you want to accumulate 100 grams of gold in next 15 years, you have the following options:
- You can straight away start accumulating 6 grams per year (100 grams / 15 years).
- Another way is investing your money in any other investment options like bank fixed deposits and purchase gold after 15 years. At current cost it would be ₹ 320,000 (₹ 3,200 x 100 grams). However today rupee value would not be the same after 15 years due to increase in gold prices. Let us assume 20% annualized increase in gold price, and then 100 grams of gold which is costing ₹ 3.2 lacs now, would cost you ₹ 50 lacs after 15 years. Now if you have to accumulate 50 lacs by investing in bank fixed deposits, you would require ₹ 31,650 per annum (assuming FD rates @ 7% p.a.). So, to reach a goal of 100 grams gold after 15 years, you need to invest ₹ 31,650 per annum assuming gold prices are raising @ 20% annualized returns and the FD returns at 7% per annum.
- Now you know which is the best investment option ?
- Investment in gold for short term investment objective: If you are planning to include gold as part of your portfolio from short term investment objective, then better you need to stay away from it. Investment in gold is only for long term investment. Classic example is that gold has touched ₹ 3,300 per gram few months back and now at ₹ 3,100 per gram.
Conclusion: Investment in gold should be done from long term investment objective. How much gold should be part of your investment portfolio should be decided based on the investment objective.
If you found this article is good, share the link in Twitter/Face book. The links are provided below.
Suresh
Topic: How much gold should be part of your investment portfolio?
- 10 Equity Mutual Funds with Low Beta and High Alpha - October 5, 2026
- 10 Mutual Funds that Outperformed with 21% to 29% Returns Since Last Gandhi Jayanthi - October 4, 2026
- 9 Hybrid Mutual Funds With 3-Year Annualized Returns Above 15.1% (Oct-26 Update) - October 2, 2026