I had invested about Rs3 lakh in gold exchange traded funds (ETFs) in 2007. The returns have not been good. I do not need this money immediately. Would you advise continuing with the ETFs or should I withdraw the money and invest elsewhere?
—B.K. Sinha
Gold ETFs have not done well in recent years. The 5-year returns on this category of funds is -2% at compound annual growth rate (CAGR). However, over the course of the last 10 years (your holding period), the returns have not been shabby at all.
The 10-year CAGR on gold ETFs (till the time of writing this) is upwards of 12% annually. My guess is that the recent downturn in prices is causing concerns for you and hence this question.
In general, investment in gold cannot be expected to return in double digits in a sustainable manner over the long term. For this reason, we don’t recommend having gold for more than 10% of your overall investment portfolio.
