12:20:80 Investment Formula: As gold prices hit all-time, combine precious metal and equity for maximum returns

12:20:80 Investment Formula: Gold on the Indian market today made a lifetime high and invested individuals benefited from it. Investing in equity is and will be trendy but today investors are also looking for other options and investing in commodities is a good catch.

The formula of 12:20:80 is the one in which investors can diversify their portfolio and invest in equity as well as gold. In the 12:20:80 formula there are three stages:

Stage 1 - 12 (months): Building an emergency fund

Every investor must make sure that they have a contingency plan, and building an emergency fund worth a year's expense must be one of the components of the plan. It is also the first criteria of investment.

An emergency fund is a financial safety net for future mishaps and/or unexpected expenses. This has to be kept liquid in a way that it can be withdrawn easily. The ideal place to keep is in saving account. One can look for a savings account offering a high rate of interest with no minimum balance requirements or heavy fees to park their emergency funds.

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Stage 2 - 20 (per cent): Invest in Gold

Gold hitting the lifetime high mark today is proof that the precious metal can also be a wise choice for investors. As per the formula, one must utilise 20 per cent of their investment for gold funds. Gold not only helps investors get the much-needed diversification, but is also beneficial due to gold’s risk-reducing, return-enhancing characteristics. Investors can consider Gold ETFs or Gold Fund of Funds for a cost effective and liquid investment.

Stage 3 - 80 (per cent): Invest in Equities

The remaining 80 per cent of the investment can be put in equities in a diversified equity portfolio that has the potential to help you reach your financial goals over the long-term. Within equity, investors need to make sure their portfolio doesn't have a bias towards a particular sector or style.

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