Here are some charts from yesterday’s post: Should gold be part of your long-term investment portfolio?
- Franklin Indian Blue Chip is chosen as representative of equity
- Franklin Indian Income fund as representative as debt.
- Per gram price data obtained from indexmudi is used to represent gold investment
- Data range is June 1997 to June 2014 (quite small but not bad).
- Results over a longer period can be found here: gold is riskier than stocks
Normalized NAV movement (absolute)
Normalized NAV movement (logarithmic)
Rolling annual returns (all three)
Rolling annual returns (debt and gold)
Extent of Correlation
The extent of correlation between annual prices returns can be easily computed with Excel. If there are two asset classes in a portfolio, ideally they must be negatively correlated. That is if one gives +ve returns, the other gives -ve returns and vice versa. This will stabilize the portfolio regardless of market conditions.
Gold and Equity annual returns are correlated by -0.65%. Negative, but too small to make a difference, in my opinion.
Debt and Equity: -3%. Better but not spectacular. The stability that debt offers in a folio makes it indispensable.
Debt and Gold: -21%. Now that is significant, but not very useful!
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via: Feedburner
- We are also on Google Plus and Pinterest
Do check out my books
My first book is now available at a 35% discount for Rs. 258. It comes with nine online calculators. Get it now . The Kindle edition is only Rs. 199.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantMy second book is now only Rs 199 (Kindle Rs. 99) Get it or gift it to a young earner
The ultimate guide to travel by Pranav SuryaThis is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)
Free Apps for your Android PhoneAll calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)