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Gold silver rally: Now running after gold and silver can lead to losses, wealth managers warned – gold silver rally investor caution advice avoid chasing metals performance risk losses long-term strategy portfolio diversification wealth management tips

Gold silver rally: In the last one year, gold and silver have given astonishing returns. This has again brought to light the usual habit of investors, who invest based on recent performance. Speaking to N Mahalakshmi at The Wealth Formula’s Diwali Blockbuster Roundtable, top private bankers say precious metals remain a hedge in clients’ portfolios, but the recent sharp rise calls for caution.

impact of investor behavior

Firoz Aziz, Joint CEO of Anand Rathi Wealth, explained the importance of focusing on Recency Bias i.e. recent performance in investors’ decisions. “Recency bias dominates most decisions… Most people sell an asset at a time when they should be buying,” he said.

Aziz said investing this way often puts investors in a position of peak entry and early exit. Meaning that seeing the recent performance, you will buy gold at Rs 1.3 lakh per 10 grams. Then when prices drop slightly, you will panic sell at a loss.

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All resistance levels have been broken

Aziz said that the recent rally in gold and silver, especially in the dollar, has been very strong. “One of the biggest tech rallies we have seen,” he said. Almost all possible resistances have been broken. Therefore, my personal opinion is that now is not the best time to buy.

He cautioned that even if the appetite to invest is strong, the flows driven by FOMO (investment out of fear) may not be sustainable. Also, there is a possibility of a break or slow down in the near future.

Long term strategy necessary

Wealth managers stressed that long-term portfolio strategy should take priority over short-term euphoria. “Equity returns are still likely to be better than commodities like gold if you choose the right fund manager over a 5-year rolling period,” Aziz said.

He also stressed the importance of active management. Because under the right fund manager, investors can achieve additional returns.

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Change in allocation of investors

High-net-worth investors in particular are now balancing their allocations. They are balancing the attraction of gold and silver with equities and other asset classes.

Aziz said, ‘Overall, investors will definitely follow the past performance, but not for too long this time. As the rally stops and there is some sideways or decline, the flow will balance out a bit. This makes it clear that investors are still moving cautiously and do not want to take full advantage of the rally in a hurry.

Look at gold and silver from a broader perspective

Now the year is towards its end. In such a situation, wealth managers advise their clients not to view gold and silver as just a short-term play, but to consider it as part of a broader diversification strategy.

It is important to take into account behavioral effects like FOMO and Recency Bias. The lesson that investors can learn from this entire environment is that they should avoid making hasty investments after seeing fast returns and should rely on long-term planning.

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Disclaimer: The advice or views given on Moneycontrol.com are the personal views of the expert/brokerage firm. The website or management is not responsible for this. Moneycontrol advises users to always seek the advice of a certified expert before taking any investment decision.

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