Both stocks and gold are important investments, but they behave differently, as stocks have a history of overcoming inflation in the long term, while gold acts as a buffer against uncertainty and improves portfolio diversity. Historically, stock markets have been shown to offer the highest long-term returns. However, stock investments are also subject to high market risks. In the current scenario, with the threat of an imminent economic crisis, investing in gold can be a safe investment alternative.
Generally, investing in gold offers moderate to high returns, even when other asset classes, including stocks, are underperforming. You may consider increasing the percentage of investment in gold in your portfolio to protect yourself from market shocks. Investing in stocks will allow you to get higher returns compared to investments in gold. The long-term return on stocks can range from 14 to 16%.
The benefits of equity investments come in the form of capital gains and dividends. Gold has grown faster than inflation. Gold worth 1,000 rupees has grown to 19,733 rupees in 30 years. By not buying gold, you gave up 1666% of the profits.
If you see that your portfolio strays too far from your desired asset allocation, you can take some corrective steps: selling gold or bonds and buying stocks.