Strategic asset allocation in investment portfolios

2 entries over 15 days, from 17 August 2026 to 31 August 2026.

01
17 August

Asset allocation in financial planning

Asset allocation involves dividing savings between financial assets (equity, bonds) and physical assets (real estate, gold).
Physical assets are 'touch-and-feel' and can be converted into consumption assets if investment returns are poor (e.g., land for housing, gold for jewellery).
Financial assets offer superior portability, which is critical for individuals with frequent work-related relocations.
Physical assets face liquidity challenges; real estate is often illiquid and difficult to sell at a fair price for life goals.
Storage of physical gold presents logistical challenges, including the limited availability of bank lockers.
Real Estate Investment Trusts (REITs) provide an alternative to lumpy real estate investments for earning rental income.
REITs are listed on stock exchanges and are subject to market risks, unlike direct physical real estate ownership.

02
31 August

Recommended gold allocation for a diversified investment portfolio is 10%.
Gold acts as a diversifier due to low correlation with equity and fixed income assets, reducing overall portfolio volatility.
Gold serves as a hedge against currency depreciation and inflation-related bond yield spikes.
Central banks are increasing gold reserves to mitigate counterparty risks associated with U.S. Treasuries amid global geopolitical fragmentation.
Gold price in India is derived from the London Bullion Market Association (LBMA) dollar price converted into rupees; long-term rupee depreciation enhances rupee-denominated returns.
Gold has an inverse relationship with the U.S. dollar; U.S. Federal Reserve interest rate hikes typically act as a headwind for gold prices.
Investment routes include Sovereign Gold Bonds (secondary market), Gold ETFs, Gold Mutual Funds, and Electronic Gold Receipts (EGRs).
EGRs are SEBI-regulated securities representing physical gold held in vaults, tradable on stock exchanges with an option for physical conversion.

Newest first. A story that ran for 15 days is exactly the kind the mains paper asks about as one question.

Discuss the role of gold as a strategic asset class in portfolio diversification and its significance in mitigating macroeconomic risks for Indian investors. 150 words · 31 August
Examine the factors driving the increased demand for gold by global central banks. How does the shift toward gold reserves reflect changing geopolitical dynamics and the search for financial stability? 250 words · 31 August
Distinguish between financial and physical assets in the context of personal financial planning. How does the factor of 'portability' influence asset allocation strategies for a mobile workforce? 150 words · 17 August
Critically analyze the role of Real Estate Investment Trusts (REITs) as an alternative to traditional physical real estate investment in India. Discuss the associated market risks and liquidity implications for retail investors. 250 words · 17 August

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