Hold 10-20% gold in portfolio at all times: Forefront Cap

Even as the World Gold Council pointed out to a slippage in gold prices, Radhika Gupta of Forefront Capital Management believes that one should never time gold like stocks. In her view, one should always hold 10-20% of gold in one’s portfolio at all times.

"I think financial gold is always preferable to physical gold whether it is in ETF form or mutual fund form. It is safer, it is more cost efficient to buy, you don’t have to worry about storage problems. So in every sense, if you are looking to buy gold as an investment, I would favor financial gold. As far as holding onto gold is concerned, gold should always form a part of your portfolio. You shouldn't try to time gold like to try to time stocks. Gold is a good hedge in your portfolio during tough times so holding 10-20% of gold at all times is a wise idea," she advises.

Below is the edited transcript of the interview.

Q: I can invest Rs 2500 per month for a period of three years. My goal is Rs 1.50 lakh to take care of my retirement. I have some insurance, LIC money back plan term with a sum assured of about Rs 2 lakh. I have also invested in Bajaj Insurance Term Plan and have a total investment of Rs 1 lakh yearly in a few equity funds. I also have a SIP in State Bank Gold Fund. How should I allocate the money?

A: Systematic plan is a good idea since you have got your insurance covered; you don't need to do any more of that. In fact, I would consolidate your insurance first. Since he is nearing retirement, he should consider investing about 40% in equities in a large cap fund like Franklin Bluechip, about 10% in a midcap fund like IDFC Premier and the rest in a fixed income fund like ICICI regular savings. Since he has already mentioned that he has got gold, which is a fairly conservative allocation as he gets closer to retirement.

Q: For someone who is sitting on a gold fund what would you advise them to do given the fact that you had some comments from the World Gold Council where the demand is slipping. Somebody earlier on was advising people to get rid of your gold ETFs and better to put your money in physical gold, what would you advise?

A: Two parts to it, firstly, I think financial gold is always preferable to physical gold whether it is in ETF form or mutual fund form. It is safer, it is more cost efficient to buy, you don't have to worry about storage problems. So in every sense, if you are looking to buy gold as an investment, I would favor financial gold. As far as holding onto gold is concerned, gold should always form a part of your portfolio. You shouldn't try to time gold like to try to time stocks. Gold is a good hedge in your portfolio during tough times so holding 10-20% of gold at all times is a wise idea.