Don't make the mistake of stopping investments in gold; Kotak Mutual Fund explains why..

Gold delivered a 63% return to investors in 2026. However, gold's momentum has slowed this year; as of August, the return stands at just 2%. This has disappointed investors. Nevertheless, Kotak Mahindra Mutual Fund maintains that including gold in a portfolio remains essential, a point highlighted in its September 2026 asset allocation outlook.

**Kotak's Neutral Stance on Equities**

Kotak has adopted a neutral stance on equities. The mutual fund house also believes there is uncertainty regarding whether gold will see a resurgence in momentum similar to that of 2026. For investors, Kotak's report does not imply that gold will replace equities; rather, it suggests that gold has a place alongside equities and debt within an asset allocation strategy.

**Benefits of a Multi-Asset Portfolio**

Kotak outlined a portfolio comprising 55% Nifty TRI, 30% Nifty Short Duration Debt Index, and 15% domestic gold. This portfolio delivered a return of 12.23% over a five-year period, whereas the Nifty 50 TRI returned 10.93% during the same time.

**Investing in Gold for Diversification**

Over a three-year horizon, this portfolio yielded an 11.20% return, compared to 7.33% for the Nifty 50 TRI. Over seven years, both delivered a return of 13.50%. Over ten years, the portfolio returned 11.96%, while the Nifty 50 TRI returned 11.95%.

**Higher Risk in Equity-Only Investments**

This highlights the difference in returns between a diversified portfolio and one invested solely in equities. A portfolio comprising a ₹10,000 monthly SIP (55% allocation), short-duration debt (30%), and gold (15%) has delivered a return of 3.98% over the past year, whereas the Nifty 50 TRI returned -3.01% during the same period.

**Gold's Role in a Balanced Portfolio**

However, this should not be interpreted to mean that gold has simply outperformed equities. The portfolio also includes a 30% allocation to short-duration debt; thus, it reflects the performance of all three asset classes. Kotak's outlook highlights certain key aspects regarding gold.

**Reasons for Continued Rally in Gold**

First, central banks across several countries have increased their gold purchases. Second, China is also investing significantly in gold. However, this does not imply that investors should start investing in gold instead of equities. The fact that gold yielded a 63% return in 2025 does not guarantee similar returns in the future. It simply underscores the importance of including gold alongside equities and debt in a portfolio.

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