Raj and Meera are friends from college. One day they come across each other in a gold jewellery shop where Raj is buying a surprise anniversary gift for his wife. Meera is also buying anklets for her newly born daughter.
Their financial preferences could not be different. Interestingly, Raj is a gold enthusiast with a love for shiny investments, while Meera is a balanced investor who believes in diversified portfolios.
After their surprised looks and pleasantries, the conversation turns to gold. After all, that's the theme of the moment.
Raj: Meera, have you seen the latest on gold? It's like it's on a mission to reach the stars! From Rs. 30,000 per 10 grams in 2019 to almost Rs. 75,000 now, it's unbelievable!
Meera: Yeah, I heard some analysts are even predicting gold might touch Rs. 1 lakh per 10 grams by 2026! But remember, gold isn't always on an upward journey. Remember 2013? It fell from Rs. 33,000 to Rs. 26,000 in months.
Raj: True, but with all the global uncertainty, don't you think gold is the safest bet now? It's like the ultimate inflation hedge.
Meera: I agree it's a good hedge against inflation, especially when everything else seems unstable. But putting all your money into gold? That's like betting your entire fortune on one horse in a race.
Raj: But gold's been a safe haven for ages! When economies wobble, gold stands tall.
Meera: Sure, but diversification is key. Remember when inflation was high in the '80s in India? Gold did well, but so did other assets. If you only invest in gold, you're ignoring other opportunities. Plus, gold doesn't yield like bonds or dividends like stocks.
Raj: But bonds have not delivered! With interest rates staying where they are, they're not exactly the inflation fighters they used to be.
Meera: Exactly, bonds have had a rough patch, down quite a bit this year. But that's why you diversify. What if gold takes a breather? You want something else to fall back on.
Raj: But with predictions of gold hitting Rs. 1 lakh, shouldn't we go all in?
Meera: Here's the thing, Raj - no asset class goes up indefinitely. Look at the dot-com bubble or the real estate crash. Gold could stabilize or even dip if the world suddenly finds peace or if there's a major shift in investor sentiment.
Raj: So, you're saying not to put all my eggs in the gold basket?
Meera: Right! Think of gold as your emergency fund, not your entire portfolio. As some experts recommend, about 5% to 15% can be allocated to gold. It's like your insurance policy against economic disasters, not your main course.
Raj: Yeah, I definitely like to have it as a part of my emergency fund portfolio. Now, also consider this. What if inflation keeps rising? Gold's the only thing that's kept pace.
Meera: Inflation might push gold up, but it also makes other investments like real estate or commodities attractive. And remember, gold doesn't pay you to hold it. It's there for safety, not for growth.
Raj: Hmm, so a bit of gold for peace of mind, but not everything?
Meera: Exactly! You want your portfolio to be like a good meal - balanced. A little gold for safety, some stocks for growth, bonds for income, and maybe some real estate for long-term stability. BTW, I like the idea of parking a portion of emergency funds in physical gold such as coins.
Raj:(smiles) Okay, I get it now. So, if gold does hit Rs. 1 lakh, we'll be ready with our diversified portfolio to enjoy the ride or catch any dips.
Meera: Bingo! And if it doesn't, we'll still have a solid, varied investment strategy to weather any storm.
Raj: To diversified investing, then! And to hoping we get to see that Rs. 1 lakh gold price, just for the thrill!
Meera: Cheers to that, but let's keep our feet on the ground and our investments spread out.
This note is for education purposes only and should not be considered as investment advice.
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