Portfolio Insurance works! and works very well !

Posted On Monday, Nov 10, 2008


The month of October has been tumultuous for the stock markets. The benchmark BSE SENSEX was down by 24% in October, taking its year to date fall to 52%. Some of the midcap stocks have witnessed a year to date market value erosion of almost 75%.

We offered investors a portfolio insurance in February 2008 by way of a new fund offer in the form of Quantum Gold Fund ( QGF ). The fund was launched with the Quantum philosophy viz "Low Cost and Direct to Investors model". It was a simple, low cost and hassle free way to take exposure to Gold

Quantum Gold Fund was launched with the belief that Gold works as a "Portfolio Insurance" - very similar to life or car insurance. It cushions or limits your losses from other asset classes in your portfolio such as stocks. You may or may not avail the benefits of an insurance policy every year; nevertheless the premiums are paid annually to keep the policy on, so that you are protected from losses that may occur any time, without notice.

Investors who had applied for QGF in the NFO in February 2008, may not have gained since the gold prices are a little lower now, but not as low as the SENSEX. Those who had allocated some money to QGF, would have been able to limit their losses from the stock markets which fell by nearly 44% since the QGF NFO. The table below gives an example on how Gold worked as a portfolio insurance under various asset allocation scenarios.

Table I: QGF works well as a Portfolio Insurance ; limiting overall losses from stocks.

 Scenario 1Scenario 2Scenario 2
 AllocationReturns AllocationReturnsAllocationReturns
Quantum Gold Fund0%-2.7%10%-2.7%20%-2.7%
Portfolio Returns -43.6% -39.5% -35.4%
Savings due to QGF 0% 4.1% 8.2%
Domestic Price of Gold - 5.0% - 5.0% - 5.0%

Source: Bloomberg,

Notes: QGF - Returns for QGF NFO investors from the allotment price (Rs 592.8748) to 31st October 2008.
(Allotment date was 22nd Feb 2008)
SENSEX Returns are from 22nd Feb 2008 to 31st October 2008.
Past performance may or may not be sustained in the future.

It has also been historically true. When the stock markets suffered, gold could have limited your overall losses as seen in the table below.

Table II: SENSEX and Gold

YearSensexGold INR

Source: Bloomberg,
* As on 31st October 2008

Above article is authored by Quantum.

View All

  • 5 Important investing Lessons from Ganesha - The Lord of Success
    5 Important investing Lessons from Ganesha - The Lord of Success

    Posted On Monday, Sep 18, 2023

    Ganesh Chaturthi celebrations is a time for festivities, fervour and above all considered an auspicious occasion to start the journey to usher in prosperity.

    Read More
  • Debt Monthly View for August 2023
    Debt Monthly View for August 2023

    Posted On Monday, Sep 11, 2023

    In the last month, the 10-year Indian government bond (G-sec) yield went up to 7.25% in the first half and then retraced back to the previous month’s closing level of 7.17% by the end of the month.

    Read More
  • Equity Monthly View for August 2023
    Equity Monthly View for August 2023

    Posted On Wednesday, Sep 06, 2023

    The S&P BSE Sensex declined by 2.3% in the month of August. Weak monsoon, spike in inflation and US yields hardening led to the marginal correction.

    Read More

Add To Cart

Add To Cart

Your cart is empty
Total of Lumpsum

Get In Touch

Take small steps in financial planning to achieve big dreams! Start your investment journey today!