Amidst the huge volatility in the Indian stock market and sharp decline in gold and silver prices from their respective peaks, investors may consider bottom-fishing in these three asset classes. However, during portfolio diversification and asset allocation, an investor may find it difficult to allocate funds across these assets. According to experts, investors who are finding it difficult to allocate funds between equity, gold and silver can use the old gold-silver ratio and Nifty 50-gold ratio. Let us also explain this in detail to you?
Nifty 50-Gold Ratio
Talking about the percentage exposure to risky assets in one’s portfolio, Pankaj Mathpal, CEO and MD, Optima Money Managers, said in a Mint report that the best way to allocate funds across risky assets like equity, gold and silver is to subtract your age from 100. For example, if you are 35 years old, allocate 65% (100 – 35) of your investments to risky assets and the remaining 35% to debt or risk-free assets. This formula helps in reducing the risk with increasing age.
On what to choose between equity, gold and silver, SEBI-registered market expert Anuj Gupta said that first of all one should decide about equity by knowing the Nifty 50-Gold ratio. Today, the Nifty 50-gold ratio is around 1.63 (Nifty 50 closed at Rs 25,571; MCX gold rate closed at around Rs 15,700 per gram). Remember, in Nifty-Gold ratio, if the result is less than 2.50, it is an indication that Gold is over-weighted and equities are available at discounted prices. Therefore, in the current market scenario, more money should be invested in stocks instead of gold.
gold-silver ratio
On how to decide which bullion to buy, Amit Goyal, Chief Global Strategist of PACE 360, while talking to Mint, said that the rate of COMEX gold today is $ 5,080 per ounce, while the rate of COMEX silver today is $ 82.345 per ounce. This means that today the gold-silver ratio is approximately 61.70. Remember, the gold-silver ratio is 80. If the gold-silver ratio is more than 80, then silver should be given preference instead of gold. Similarly, if the gold-silver ratio is less than 80, then silver should be preferred over gold. Since today the gold-silver ratio is around 61, one should look at gold before silver. He advised investors to use COMEX price while calculating the gold-silver ratio.
Which asset should be given priority?
The biggest question is that considering the current market scenario, which asset class would be better to invest in. According to experts, while diversifying your portfolio, it would be better to invest more and more funds in equity. After that invest in gold. In the end you should turn to silver.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.