Gold funds or gold ETFs are more liquid options than sovereign gold bonds

Gold funds or gold ETFs are more liquid options than sovereign gold bonds by Srikanth Meenakshi for LiveMint

Investing in SGBs is a good idea if one plans to hold gold till the bonds’ maturity but while buying it in the secondary market, one should see that one gets it at a good price.

I want to invest in gold as it is hitting new peaks due to covid-19. Should I go for gold funds or sovereign gold bonds (SGBs)? Also, what would be better: investing a lump sum or systematic investment plans (SIPs) of mutual funds or SGB tranches?

—Manoj

It is not a good idea to buy gold because it is hitting new peaks. View gold as an asset diversifier, which can provide a hedge to your equity portfolio. Gold has shown a tendency to generate high returns in short periods and then get into a sleep mode—often years of underperformance. So be aware of this and use it to add to other asset classes, with 10-15% exposure in your overall portfolio.

Investing in SGBs is a good idea if you plan to hold gold till the bonds’ maturity. But while buying it in the secondary market, see that you get it at a good price. Also, when you sell them, there needs to be sufficient liquidity. On this count, SGB’s liquidity has not been very good thus far. Hence you will be better off investing in gold funds or gold exchange-traded funds (ETFs). Given that gold has rallied sharply, it is better to invest through the SIP mode.

I am investing in the following funds via SIPs: 10,000 in Mirae Asset Emerging Bluechip; 8,000 each in Axis Focused 25 and Motilal Oswal Multicap 35; 4,000 in Axis Small Cap; and 3,000 in DSP Small Cap. The small-cap funds have seen 5-10% losses, while the rest have made small losses. Looking at the current situation, should I continue with small-caps? Do I need to make changes to my portfolio, which is meant for wealth creation? I am 35 years old and have above-moderate risk appetite.

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Rory Hall, The Daily Coin and Gospel News Network. Beginning in 1987 Rory has written over 1,400 articles and produced more than 500 videos on topics ranging from the precious metals market, economic and monetary policies, preparedness as well as geopolitical events. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver, Gold Seek, SGTReport, and a great many more. Rory was a producer and daily contributor at SGTReport between 2012 and 2014. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Dr. Warren Coates and Peter Schiff, to name but a few. Don't forget to visit The Daily Coin and Gospel News Network to enjoy some of the best economic, precious metals, geopolitical and preparedness news from around the world.