Why I Personally Don’t Invest More than 5% in Gold?

Why I Personally Don’t Invest more than 5% in Gold?

Many people ask me about my view on gold investing and also ask for my opinion about gold investing. Well, I personally never invest more than 5% of my total portfolio net worth in Gold. And I advise people to invest not more than 10% of their total portfolio net worth in a gold.

This is because I have my own philosophy behind gold investing. I have analyzed various asset classes in very detail over the past few years. And Why I am not very much happy with gold is because we don’t have any proper and accurate valuation method of gold.

In Businesses, we have a Cashflow/Income to predict its future valuations as well as the current worth. But Gold doesn’t have any income. The gold is the non-income producing asset class and that’s why its fair valuation is practically impossible.

Traditionally the gold price has direct correlation with the US Monetary Base. Thus, any increase or decrease in the monetary base of USA will have effect on the gold price.

Several theories have been proposed for the valuation of Gold. These theories are based on Inflation, US Monetary base, crude oil prices and various other things.

But all of these are not that much accurate. After all gold is the non-productive asset class. It does not have any income/cashflow generating capacity and that’s why this makes its fair valuation practically impossible.

And this is the reason I personally never invest more than 5% of my Total net worth in Gold and I never advise people to invest more than 10% of their total portfolio net worth in a gold.

Many people argue with me that, since past few years the gold has given outstanding returns than equity so why not take out all of your money from equity and invest in gold? Well, I personally don’t advise anyone to do that.

In my opinion, Equity is still the best asset class to park most of your money for the long time horizon.