Gold vs Silver vs Equity: What experts say about building the right portfolio

In recent months, gold and silver have outperformed equities, drawing the attention of investors who are looking for safety as well as returns.

Gold prices have risen nearly 40 per cent in the past year, while silver has surged by almost 50 per cent, making both metals attractive in the short term compared to stocks.

Experts, however, believe that investors should not look at short-term performance alone and should decide between equities, gold, and silver based on their investment horizon and risk profile.

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Why are Gold and Silver Rising?

The rally in gold and silver is driven by a mix of global and domestic factors. Central banks across the world, particularly in countries like China and Russia, have been building up their reserves of gold.

This has created strong demand in the global market. At the same time, geopolitical tensions, including the ongoing Russia–Ukraine war, and declining faith in the US dollar as a safe currency have added to gold’s appeal as a hedge.

Silver, unlike gold, is also an industrial metal with significant use in electric vehicles, solar panels, and electronic goods.

This dual nature of silver—as both a precious and an industrial metal—has made it particularly attractive, adding momentum to its price rise.

Gold and Silver vs Equity

When comparing the performance of these metals with equities, the results vary depending on the time frame. In the short term of one to three years, gold and silver have delivered far stronger returns than the equity markets.

However, over a longer horizon of ten to twenty years, equities continue to dominate as a wealth creator, compounding at around 14 per cent annually, which is broadly in line with the long-term returns of gold.

This makes it clear that equities and precious metals should not be seen as substitutes but as complementary parts of a portfolio.

Asset Allocation by Risk Profile

Experts recommend that investors build their portfolios according to their stage of life and risk appetite. Younger investors with higher risk tolerance can hold a large portion in equities, a small portion in gold and silver, and the balance in fixed income.

Investors in their middle age should balance equities with higher exposure to fixed income while keeping a small allocation to precious metals. Older or conservative investors are advised to keep equities to just over half of their portfolio and allocate the rest between safer fixed income instruments and gold or silver.

This strategy ensures that investors can enjoy growth while still protecting their capital.

Gold vs Silver – Which is Better Now?

Analysts are of the view that silver looks more promising than gold at present. Gold has already rallied significantly and could see some cooling, while silver is still supported by a gap in supply and its rising industrial use.

Some experts also suggest that investors who want exposure to both metals can choose exchange-traded funds or a fund of funds where professional managers decide the split between gold and silver, helping investors avoid the complexity of making that choice themselves.

How Should Investors Buy?

While prices are high, experts caution against making lump-sum purchases of gold and silver. Instead, they recommend systematic investment plans or staggered entries over time.

This helps reduce the risk of entering at peak prices. Another important suggestion is to invest through ETFs or mutual funds, which are safer, more liquid, and easier to manage compared to holding physical gold and silver.