20 Feb 2021

My portfolio does not have gold anymore

I am a new investor. I started goal-based investing only in Jan 2020. (Big thanks to Kuvera for introducing me to investing discipline!) I had bought into the idea that gold brings stability to the portfolio, so I had an allocation for gold.

The more I looked at gold, however, it became clearer that gold does not really add much to my portfolio. The gold price chart below was the ‘convincing evidence’ that I was looking for. It’s clear from the graph that for many years gold simply sits there without appreciating in value!

Gold price in INR in the past 10 years (click to enlarge)

That was bad enough for me, but it actually gets worse. Gold is bought and sold in the international market in USD. During this 10 year period, INR depreciated in value compared to USD. So gold must have lost value during most of the time represented in this graph. Looking at the price in USD confirms that from late 2012 to 2016, there has been a big fall. And then it sits idle for 3 years. (Both price graphs taken from goldprice.org.)

Gold price in USD in the past 10 years (click to enlarge)

It was an easy decision. I did not want to sell equity and buy gold when it was time to rebalance. I immediately stopped buying new gold, but I held on to the gold I had already bought. Let it sit idle for 3 years, I thought, so when I sell I’ll qualify for long-term capital gain. Yesterday, I realised that this was just Status Quo Bias (or maybe Sunk Cost Fallacy?). I would be better off if the same money was invested in assets that are better aligned with my preferences. So I sold all the gold.

Feeling good about having made the (apparently) tough call to let go of an asset, and also for having decluttered the portfolio by a little bit.

Update: I made a follow-up post going over more reasons behind my decision to exit gold.

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