Gold Investment This Diwali: Is 5-7% portfolio allocation enough? Experts explain

Investors considering alternatives to Gold FoFs should also be careful about the price they pay |Image: ChatGPT generated|

Gold Investment This Diwali 2026: Gold can be part of an investor's portfolio, but the ideal allocation depends on investment objectives, time horizon and existing holdings, including physical gold, experts told Zee Business.

Kshitiz Mahajan, Managing Partner & CEO-Complete Circle Wealth Solutions, suggested that investors could consider allocating around 5-7 per cent of their portfolio to gold, including physical gold holdings. He advised investors to assess the total value of their gold before making additional investments.

Pankaj Mathpal, MD of Optima Money, said the appropriate allocation could vary between 5 per cent, 10 per cent and 15 per cent, depending on an investor's financial objectives and investment horizon.

The experts advised investors to assess their existing gold exposure before making fresh investments, particularly amid restrictions on new investments in several Gold Exchange-Traded Fund (ETF) Fund of Funds (FoFs) during the festive season.

Gold allocation: Is 5-7% enough for your portfolio?

Mahajan advised investors to calculate the total value of gold in their portfolios before deciding whether to invest more. This assessment should include physical gold holdings rather than focusing only on financial investments such as Gold ETFs and Gold FoFs.

"First, look at the exact value of gold in your portfolio. Check whether gold accounts for 5-7 per cent of your portfolio, including the value of your physical gold," Mahajan said.

He added that investors who already have sufficient gold exposure need not increase their holdings simply because gold prices have risen. Those who wish to buy gold for festive occasions such as Dhanteras or Diwali could consider purchasing a smaller quantity.

Mahajan also cautioned against selling existing gold holdings merely because prices have increased. Instead, he advised investors to assess their allocation and avoid adding more gold unnecessarily.

His suggested allocation of 5-7 per cent is a reference point for investors to evaluate their portfolios, rather than a fixed limit applicable to everyone.

Gold allocation can vary between 5%, 10% and 15%

Mathpal said gold should have a place in a long-term investment portfolio, as different asset classes move through different market cycles. Investors who have missed a rally may be tempted to buy gold later, but he cautioned against making investment decisions driven by the fear of missing out.

"Every asset class has a cycle. We have seen investors who did not invest in gold feel that they missed out when prices rallied. However, that does not mean they should invest later simply because they missed the rally," Mathpal said.

He added that the appropriate gold allocation could be 5 per cent, 10 per cent or 15 per cent, depending on the investor's investment horizon and objectives.

The comments indicate that there is no single allocation suitable for every investor. Investors should consider their existing assets, financial goals and the role gold is expected to play in their portfolios before deciding how much to invest.

Why experts advise against increasing gold exposure indiscriminately

The discussion on portfolio allocation comes amid a decision by several asset management companies (AMCs) to restrict fresh investments in their Gold FoFs.

According to the experts, the move is intended to discourage incremental gold demand during a period of elevated festive buying and help ease pressure associated with gold imports and foreign currency outflows.

Mahajan said investors should consider the broader economic implications of gold demand and avoid increasing purchases unnecessarily if they already hold an adequate quantity.

Mathpal similarly advised investors who already have gold in their portfolios not to rush into fresh investments, particularly when the direction of the market is uncertain.

However, the restrictions do not mean investors must stop all gold investments. Existing SIPs and STPs in affected schemes can continue, while fresh SIP registrations, STPs, lump-sum investments and switches into restricted Gold FoFs may not be permitted under the applicable restrictions.

Gold ETFs and Sovereign Gold Bonds: Check the price before investing

Investors considering alternatives to Gold FoFs should also be careful about the price they pay, Mathpal said.

Gold ETFs can be bought and sold on exchanges, where investors trade existing units with one another. Such secondary-market transactions do not necessarily create fresh demand for physical gold. However, strong buying interest can push an ETF's market price above its indicative net asset value (iNAV).

Mathpal advised investors to check the iNAV published by the fund house and compare it with the ETF's market price before investing.

"If you want to invest in a Gold ETF at this time, check its iNAV on the fund house's website. This will help you understand the premium you are paying," he said.

He also cautioned investors buying Sovereign Gold Bonds (SGBs) in the secondary market to compare their prices with the prevailing value of gold. Paying a substantial premium can increase the risk of losses if that premium narrows.

Other options discussed by the experts included Gold FoFs that continue to accept fresh investments, physical gold in the form of coins and bars, and SGBs available in the secondary market. The suitability of each option depends on its price, costs, liquidity and the investor's requirements.

Gold as a portfolio diversifier, not a reason to chase returns

The experts emphasised that investors should maintain a disciplined approach to gold allocation instead of reacting to price rallies or festive-season demand.

Gold can serve as a portfolio diversifier, but its allocation should be considered alongside other investments, including equities, which have their own risk and return characteristics.

For investors deciding whether to increase their gold holdings, the first step is to calculate their existing exposure across physical and financial gold. Mahajan's 5-7 per cent suggestion provides one reference point, while Mathpal's comments underline the importance of tailoring allocation to individual objectives and investment horizons.