Synopsis: Experts recommend a 5% to 15% allocation to gold in 2024 portfolios as it offers a hedge against uncertainty. While gold may shine amid geopolitical risks, equities remain crucial for long-term growth, necessitating a diversified approach.
As we look ahead to 2024, investors face a common question: will gold outperform the Nifty and other equity markets, and how should one adjust their portfolio to balance risk and return? Experts agree that both gold and equities have unique strengths and should be strategically allocated within a portfolio, rather than viewing one as a superior choice over the other.
Performance Comparison
Historically, Nifty has outperformed MCX gold over the long term, offering 12.7% CAGR over the last two decades compared to 12.0% for gold. However, in the past five years, gold has shown its strength, providing a 16.2% return, outpacing Nifty's 14.0%. This demonstrates gold's value, particularly during economic downturns, such as the 2008 financial crisis, when it acted as a defensive asset.
In 2023, both equities and gold demonstrated strong performance, with market analysts expecting this trend to continue into 2024. The US Federal Reserve's anticipated rate cuts are expected to provide a favorable environment for both asset classes.
Strategic Allocation Recommendations
Ajit Mishra, a leading market expert, suggests maintaining a diversified portfolio with allocations to equities, debt, and gold to hedge against uncertainty. He advises a 5% to 15% allocation to gold, emphasizing its role as a hedge during geopolitical tensions or economic instability.
Sujit Modi from Share.Market echoes these sentiments, noting that gold's strong performance in 2023 was largely driven by geopolitical factors and central bank actions, particularly in China and Europe. Modi advises maintaining an appropriate allocation to gold and rebalancing if an investor’s equity exposure exceeds their risk tolerance.
Outlook for 2024
Trivesh D emphasizes that gold often performs well in times of uncertainty but may see limited upside if global tensions ease and no major crises emerge. On the other hand, equities could benefit from global economic growth and corporate performance, positioning Nifty for stronger returns in the coming year.
Aamir Makda highlights the critical role of the Federal Reserve's monetary policy in shaping gold prices. A potential rate cut could enhance gold’s appeal, but equities are likely to continue benefiting from economic recovery and growth.
Conclusion
As we move into 2024, experts recommend maintaining a well-balanced portfolio with a 5% to 15% allocation to gold, depending on individual risk tolerance and market conditions. While gold serves as an excellent hedge during periods of economic uncertainty, equities remain a primary driver of long-term growth, especially in a recovering global economy. By diversifying across asset classes, investors can protect themselves against market volatility and capitalize on growth opportunities.
Disclaimer: The views and recommendations above are those of individual analysts or broking companies. We advise investors to consult certified experts before making any investment decisions.
