What experts have to say on how to diversify your portfolio

Commodities are in a bull run, with gold at an all-time high and silver, copper, aluminium, and zinc at multi-month highs. Soft commodities are surging too from palm to rubber, and cocoa is at an all-time high.

From Geopolitical tensions in the Middle East to Elections in many countries, inflation concerns, supply disruptions, improving economic data, and China demand, volatile Fiat currencies have all led to buying in tangible commodities.

CNBC-TV18 spoke to Lakshmi Iyer, CEO – Investment & Strategy at Kotak Alternate Asset Managers and Vikram Dhawan, Fund Manager- Commodities, Nippon India Mutual Fund to discuss the part commodities can play in your portfolio.

Traditionally, investors tend to focus on financial assets such as equities and fixed-income securities. However, Iyer pointed out that within these asset classes, there is a growing interest in diversifying into commodities.

She said, “But over the last few years, I think we have seen investor interest gravitate towards not just pure play financial asset classes, but also looking at mediums to participate in commodities as a sector on a slightly broader basis. Beginning with obviously precious metals, but slowly and steadily you see it populating to other commodities as well. But yes, predominantly gold and silver within the commodities pack seem to be the preferred way for investors to participate.”

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Iyer emphasised the importance of long-term planning when incorporating commodities into portfolios. She suggested that investors should adopt a strategic outlook spanning over 1,000 days, or roughly three to seven years, to maximize the potential benefits of commodity investments.

Dhawan highlighted the need for clear policies to promote the development of domestic commodity markets. He advocated for aligning Indian market standards with global benchmarks to attract both domestic and foreign investors.

Dhawan suggested that if local markets fail to meet global standards, investors should be allowed access to overseas commodity markets to ensure adequate diversification and opportunities for growth.

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