The biggest question is how much gold is appropriate to keep in your portfolio. Experts say the answer is simple: a 5 to 15% formula. Let’s understand this formula.

What is the formula of 5 to 15%?

This 5–15% formula suggests that gold should hold only that portion of your total investment assets that is consistent with your risk appetite. If you are active in the stock market and can take risks, 5% gold will suffice. However, if you seek stability or are nearing goals like retirement , 10–15% gold will balance your portfolio. Simply put, gold may not provide rapid returns, but it does protect against losses during downturns.

Formula: Gold Allocation = Total Portfolio × (5% to 15%)

For example, if your portfolio is worth ₹ 20 lakh, then Gold = should be between ₹ 1 lakh (5%) to ₹ 3 lakh (15%).

When the rupee falls, gold rises

The rupee’s value also significantly influences gold prices in India. In October 2025, the rupee hit a record low of around ₹ 88.8 per dollar. When the rupee falls, gold becomes more expensive, which is why gold helps protect your portfolio during market volatility.

In which form should you keep gold – ETF, SGB or physical?

If you have a demat account, gold ETFs or mutual funds are the easiest and most digital way to invest, allowing you to buy and sell at any time, just like stocks. Those without demat accounts can gradually increase their investment through SIPs. If you’re thinking long-term, Sovereign Gold Bonds (SGBs) are the best option, as they offer 2.5% interest annually and the entire maturity amount is tax-free. However, new installments won’t be issued until October 2025, so existing investors will continue to receive interest.

Taxes and timing are also important factors in investing. Gold ETFs or mutual funds held for more than one year are subject to a 12.5% long-term capital gains tax. On the other hand, SGBs are tax-free upon maturity, with only the annual interest added to income taxable. However, physical gold carries the hassles of making charges, GST, and storage, so digital gold is considered more prudent today.

Now let’s discuss how to follow this 5–15% rule. Suppose your total portfolio is ₹ 20 lakh, investing ₹ 1 to ₹ 3 lakh in gold would be a balanced decision. Instead of investing all the money at once, it’s better to make gradual SIPs or small investments every few months. And be sure to rebalance your portfolio once a year to ensure the gold portion doesn’t exceed your target limit. This approach will protect you from market fluctuations and provide long-term stability.

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