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© Reuters Dhanteras 2020: Consider investing beyond gold, try multi-asset fund

Dhanteras marks the beginning of the Diwali festival. Hindus consider this an extremely auspicious day for making new purchases, especially of gold or silver articles and new utensils.

It is believed that a new “Dhan” (wealth) or some item made of precious metal is a sign of good luck and will multiply 13 times if bought during this period.

In modern times, Dhanteras has come to be known as the most auspicious occasion for buying gold, silver, and other metals, especially kitchenware. The day also sees heavy purchases of appliances and automobiles.

For a moment let’s stick to talking about gold. Gold has shone brighter than ever this year, as the worst epidemic of a century struck the world and left us grappling amid unprecedented events.

But, irrespective of the uncertainty that surrounded the global markets since earlier this year, gold has risen in price and it will possibly continue to gain value over time.

Dhan, can be perceived as more than just gold, as the world saw the announcement of a possibly viable vaccine the global markets rose, Indian stock markets are at an all-time high, and yet, gold saw a fall of Rs 1,000 for every 10 gms of gold.

As an investment, gold is undoubtedly a great option. However, as it’s always said, gold provides great financial security in troubled times and may not play a heroic role in your portfolio. Look at gold as a hedge, and not an investment.

This year, consider investing in products other than gold, look at multiple asset classes and in avenues where you don’t need to invest large amounts of money.

A multi-asset fund is a great addition to a portfolio considering it is required to invest in at least 3 asset classes and gives you exposure to equity, debt, and an additional asset class, possibly gold.

The benefit of these funds is that the fund manager makes the decision to buy or sell assets while you can sleep at ease. Multi-asset funds carry less risk than most hybrid funds as the investments are spread across multiple asset classes. A balanced advantage fund would be a good addition to your portfolio.

While talking about equity, in March and April, we saw valuations that could have given us quivers like falling markets gave Harshad Mehta. However, the only feeling we might have now is that of regret. Of not investing in equities then as the world sees all-time highs.

Equity as an asset class is evergreen. While there are questions if stocks are overpriced, the proof is in the pudding. For a 7 year and beyond time horizon, a larger exposure of your investments should be in equity.

Adding international exposure to your portfolio is also advised considering the benefits of diversification that it brings to your portfolio with different markets and currencies. An international fund could be a valuable asset.

As interest in FDs, RDs, Bonds, etc. give us a return of 4 to 5.5%, it is important that you look to other asset classes to beat inflation.

A Dynamic bond fund is a great replacement for your good old FD. While it does not bring the promise of fixed payments, it brings the potential of better returns. Dynamic bond funds invest in debt securities that vary in maturity.

Every mutual fund is managed by the fund manager who invests the amount across different debt securities in order to reduce risk and achieve a higher rate of return.

There is no static element in these portfolios and they stand to benefit from more agile decision making and could give us returns a couple of basis points above the good old fixed deposit.

A well-diversified portfolio does not disappoint. As you consider the glow of gold, also consider the potential of the world’s financial future and the growth that your money could see.

(Dipika Jaikishan, Co-founder and COO of Basis, a platform that powers financial independence for women through knowledge boosters, curated advice, and supportive communities)

Disclaimer – The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.