When World War 1 began in 1914, (1914-1918) US economy was in recession. But then started an economic boom as Europeans were purchasing US good for war. Further there was a massive US federal spending on war. Massive hiring on Govt. jobs and Military roles. Military Hardware and war specific products made a large chunk demand, eventually leading to a major economic expansion.
Unprecedented situations stimulate human minds, capabilities and re-shape the progress path. There comes a paradigm shift in the way people think and behave. In the past all crisis have led to an economic boom sooner or later. We are witnessing the same now, battling CORONA.
Equity Markets have soared to unthinkable levels, but not surprising. We witnessed a 500% rise in Sensex during June 2003- December 2007. Markets that time was recovering from Dotcom bust, Asian currency crisis.
However, there is enough in media about the meteoric rise in Equities. What we want to focus on and start taking allocation is in Gold.
Performance Matrix of Key Assets:
- Sensex Started in March 1979. And since it has delivered near 16.25% CAGR returns.
- Gold, ‘THE KING in CRISIS’ also delivered double digit returns in last 41 Years.
- AUG 2020, when GOLD touched its all-time high of Rs 56000/- (per 10gm) in MCX, and since then its sitting with a -15% returns till now. Whereas Equities delivered an eye popping 50% returns during Aug 2020- till now.
Well, with above statistics I’m not trying to prove that the heydays of Equities are over, but for sure it’s time to start building up bit-by-bit in Gold. As an Asset class, it should form 5%-10% of any core portfolio.
Rome was not built in a day, but bricks were placed every single day.
GOLD: 1964-2020. Has delivered over 12.50% Annualised returns since 1964.
- It’s an Asset which does the balancing act between Equities & Fixed income.
- An asset which world will cling to during crisis.
- Investor’s need to be patient with their Gold holdings. There are Long drawn periods of Lull where it doesn’t deliver, and then suddenly moves up in a spurt and continues to rise. This rise needs to be captured in the portfolio to make the maximum.
How best to invest in gold? Gain maximum benefits and minimise taxation.
Write back to me at Yogendra.shah@snma.in.