By: Gaurav Verma
Gold and Sensex are two asset classes which investors can’t miss riding on. While one is the shiny glittery metal which is loved and admired since centuries and stores real value is unaffected by factors like inflation and economic slowdown, the other Sensex being the stock market index which is the performance metrics of 30 largest companies listed in BSE represents equities. The Sensex has seen significant growth over the years, reaching an all-time high of 67,619.17 on July 24, 2023. The index has also been volatile, experiencing periods of both bull and bear markets. It is a useful tool for investors who want to track the performance of the Indian stock market. It can also be used to compare the performance of different Indian stocks and sectors.
This remarkable trend highlights the value of diversification and the need to take into account nontraditional investment possibilities. It’s important to be informed and look into new options as the market landscape changes if we want to effectively protect and expand our assets. Though due to a number of factors, the medium-term outlook for gold is favourable. Increased investment in gold is anticipated to be sparked by anticipated rate reduction by banks, an easing of the dollar index, and the current state of macro uncertainty. As a result, gold might in the longer-term rise to values as high as 68000.
I mean think about the investment time horizon. An investor may feel more at ease with a bigger allocation to gold if they are investing for the long run. However, if they are close to stepping down, they might wish to hold fewer gold holdings in favour of other reliable investments considering their risk tolerance. If an investor is a risk-averse investor, they may want to limit their exposure to gold. However, if they are comfortable with more risk, they may want to consider a higher allocation to gold.
Another thing to consider is the percentage of gold they want to include in their portfolio. A good starting point is to consider a 5-10% allocation to gold. However, the specific percentage will vary depending on the individual investor’s risk profile and return expectation circumstances.
Also consider what is an investor’s investment goal? If an investor is looking for an investment that will provide long-term growth, they may want to focus on equity. However, if they are looking for an investment that will provide a hedge against inflation and economic uncertainty, they may want to consider gold. So, which one will ride faster to 100K? The answer depends on a number of factors but Sensex definitely has an edge because taking into account where India stands today as compared to the world, India is doing really well on the economic front and the world is looking at the Indian sub-continent as a key place for investments. A much faster growth rate is expected and equities are expected to grow much faster but at the cost of volatility which a trending market can never escape.
(Gaurav Verma, small case manager and Director 21G Investment Advisers. Views expressed are author’s own. Please consult your financial advisor before investing.)
