However, savvy investors with an eye on cost looking to make tactical calls or with the ability to manage and rebalance this allocation themselves can consider a mix of sovereign gold bonds and silver ETFs.
The Edelweiss ETF FoF is the first-of-its-kind fund in India that gives investors exposure to both gold and silver together. It is an open-ended scheme which will invest in gold and silver ETFs with an equal allocation, which will be rebalanced periodically. The new fund offer (NFO) will close on September 7.
Financial planners believe investors should diversify portfolios and have a 5-10% allocation to precious metals, as they have a low correlation with equities.
While gold acts as a hedge against inflation, silver has several industrial uses and stands to benefit from new age technology products such as smart phones, electric vehicles and solar panels.
Over the last one year, in dollar terms, gold and silver have both lost value, by 3% 19.9%, respectively. This provides a good entry point, according to some financial planners.
“As interest rates peak, gold price could rise while as industrial demand picks up, silver prices could see a rise,” said Nirav Karkera, head of research at Fisdom.
“Since the (Edelweiss) fund combines both precious metals, there is ease of investing, especially for retail investors who can also route money using SIPs,” said Vineet Nanda, founder of Sift Capital. However, Nanda believes savvy investors, who can time the markets or make their own allocation based on their calculation, and want to keep costs low, can invest in a mix of sovereign gold bonds and silver ETFs.
Financial planners have recommended buying gold via sovereign gold bonds, since it gives an extra 2.5% interest per annum. There is also no expense ratio, no storage cost and the gains are tax-free on maturity after eight years.