Will you wait to allocate to GOLD ?

Today’s Daily Byte

Markets are pulling in a surprise 1.1% up on Nifty. This was nobody’s guess four days ago. We were looking for a pullback to target number two, which was the pivot high of the previous down candle. I think the market has surprised everybody right now, and of course, there is optimism and some hope for unexpected news in the budget. Maybe the market knows something we don’t—that’s the best guess we can make at this point.

Usually, if I can say more often than not, the market would not have rallied this hard if there was anything really bad in the budget. So, I think a bad budget is out of the window for most part. I would say 99% we will not get a bad budget. Yes, it may be a lame budget, and we may slump a bit post that. That’s the best guess I can make from these price moves.

Reading Time : 4 Minutes

Will you wait for more proof to allocate to GOLD ?

Many investors often compare gold returns with Nifty returns, but this is not the right way to look at gold. Gold is not meant to beat equity returns over the long term. The real purpose of gold in a portfolio is to act as a hedge when there is stress in the equity markets. It is not an alternative to stocks but a way to balance risks.

If you look at portfolio theory, it clearly states that investors should have assets that are not highly correlated with each other. If all assets rise and fall together, then there is no real diversification. The main idea is to have at least one asset that provides stability when others are facing volatility. . . . .

Reading Time : 4 Minutes

Equity vs Bonds

When we look at market data over the last century, one thing becomes very clear—equities have massively outperformed bonds. A fascinating chart by Meb Faber shows that after adjusting for inflation, $1 invested in equities in 1924 has grown to $488 today. On the other hand, the same $1 invested in bonds has practically gone to zero. This means that while stocks have built long-term wealth, bonds have struggled to keep up, especially after considering inflation and taxes. . . . . .

Reading Time : 3 Minutes