Should I increase allocation to gold ETFs ?

I am 45 years old and professionally employed. With gold prices at a record high, should I pause my equity SIPs temporarily and allocate more to gold ETFs or sovereign gold bonds, or should I stay the course with SIPs?

Rushabh Desai Founder, Rupee With Rushabh Investment Service: You should take advantage of periods when an asset class underperforms by investing more. Continuing with the equity SIPs during market corrections can help you generate superior risk-adjusted returns over time. I strongly urge not to pause your SIPs. Instead, consider topping them up during this correction to accumulate more mutual fund units at lower prices. Gold prices have surged due to temporary global uncertainties, which are likely to subside. Once stability returns and economic growth picks up, gold prices may stagnate or decline, which will be a better time to invest in gold, not now. Investment decisions and shifts between asset classes should be guided strictly by goals, risk appetite, time horizon, and overall asset allocation. Following a ‘buy on dips’ and contrarian strategy will help you succeed in your investment journey

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Is it wise to rebalance a mutual fund portfolio in a falling market, or should I wait for recovery before realigning asset allocation?

Vidya Bala Co-Founder, PrimeInvestor.in: Rebalancing typically means allocation change. It is called for whenever the current allocation deviates significantly from the original allocation. Typically, a deviation of five percentage points or more on the upside or a fall would call for rebalancing. In a falling market, it is possible that your equity reduces by a good proportion from your original allocation. That is a signal to invest more in equity, either by taking it from debt and adding to equity or infusing fresh money into equity. If your holding has been for a short period, it is better to wait it out. If you have already seen some funds underperform for a long time, even before the fall, you need not wait.

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