10% of investment portfolio must be in gold
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Debasish Mallick is the managing director and chief executive officer of IDBI Asset Management Ltd.
He speaks to S. Umamaheshwar about investment plans and the effect of global developments on people’s investment decisions. Excerpts:
Q: What is your outlook for gold as an investment option considering that it is already at the peak?
Gold is closely linked with the global economy. It is considered to be the safe haven for investors and it is certainly the best investment in the time of a crisis situation.
Though there are signs of improvement in the global economy, the weakness in the US dollar — due to its struggling economy — and other fully-convertible currencies like euro and yen could force central banks to park some part of their reserves in gold. So, TINA (there is no alternative) factor would help the yellow metal in attracting investments.
Q: What percentage of a person’s investment needs to be in gold?
Gold acts like a hedge against inflation. So about 10 per cent of one’s investment portfolio should be in gold. Gold ETF would be an ideal way of investing as unlike physical gold, it does not attract taxes.
You could also invest in gold ETFs through a systematic investment plan and its price would be almost near that of the physical gold.
Q: Stock markets are at 17,000 levels, but the global economy does not seem to be on the recovery path yet, leading to a lot of volatility in the markets. So is it the right time to enter stock markets?
As always, we can’t time the market. But there are some positive signs in the global economy such as the growth in the US economy, revival of US housing market, and a semblance of stability returning to Europe. These factors could revive the stock markets.
Q: You seem to be focused on debt funds. What is the reason?
Debt funds are one of safest investment products. The funds will not be invested in any company with less than AA credit rating. It could attract investors who brunt their fingers in the stock markets during the downturn. Our Dynamic Bond Fund will attempt to encash the short-term interest rate volatility and offer conservative retail investors optimised returns.
Q: What are the new plans in the pipeline?
Our plan to launch an equity fund is at an advanced stage. We will launch a balance fund in some time. In the next six months, we will come out with two or three new plans.
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