You may consider gold as an asset class (5-10 per cent of your portfolio) as a hedge against inflation and a fall in other asset classes, such as equity and debt. This is because the factors affecting gold prices are different from those that impact other asset classes. So, when other assets are losing value, gold helps prop up the value of your portfolio. However, gold funds may also lose value at certain points of time. They invest in physical gold of a stated quality. The value of the units depends on the returns that gold generates, minus the fund management expenses. Another way to invest in gold is through gold exchange-traded funds (ETFs). Gold ETFs offer investors a cost-efficient way to participate in the gold bullion market by holding the yellow metal in paperless demat form. The investment objective of a gold ETF is to provide returns that, before expenses, closely correspond to the returns from the domestic price of physical gold. It is clear that FOFs, international funds and gold funds can go a long way towards ensuring steady portfolio performance und er different circumstances
