There are many reasons why we shall look beyond conventional Fixed Deposits, PPF and high growth Shares and Mutual Funds. Gold is always seen as a thing to own and only for consuming as ornaments, for jewelry but seldom as an investment purpose, in fact silver also for that matter.
But now there are many reasons to invest in GOLD, just like people invest in Shares, Mutual funds, PPF, NSC, and Fixed Deposits.
Reason 1: Stock Markets are becoming risky and uncertain
Stock Markets are in Bad shape for at least short or medium-term at least. No one knows whats going to happen in 6 months or 1 year or 2 years. Long term may be good but still, a medium-term perspective is not very clear.
Not only the Stock Market but the whole of financial Markets are uncertain if you consider problems like Inflation, dip in projected GDP growth of economy, etc.
Reason 2: It acts like a hedge towards Inflation and Foreign currency
As the Indian currency is gaining against Dollar and other currencies, Rupees is set to become more strong in the coming years. Gold has an inverse relation with Dollar.
https://news.goldseek.com/SpeculativeInvestor/1171382460.php
In the future as Dollar weakens, GOLD will become more strong.
Reason 3: Its a relatively less known investment option and has high potential in future
Looking at history, and every time we see that an investment option starts becoming popular and by the time most people know about it, it already gives most of its returns and becomes a talk of past.
GOLD has started gaining attention as an investment option and becoming popular and still in its middle stage, if not early.
So it’s the time to ride the boat.
Reason 4: Future High Demand and less supply
In future gold is going to in high demand and it’s already in less supply, so according to the demand-supply logic, the prices are bound to go up in the near future. Indians account for 23% of the world’s total annual consumption and overall global demand has increased 15% year on year
Gold demands were an all-time high in 2007 and expected to increase in the coming years due to mismatch in demand and supply.
Reason 5: More Diversification
Before some time back, diversification of portfolio was limited to Equity, Debt and Real Estate and some cash, so that your risk is spread across different class of assets. GOLD has evolved as another asset class and not it help in diversifying your portfolio.
What’s the best way to invest in GOLD?
It really depends on the person and situation and the motive of investment.
ne can invest in GOLD directly by buying gold in physical form like jewelry, gold biscuits, gold bars. It all of these require some maintenance and some problems are associated with investing in a physical format like :
- No surety of purity, you can be sure that you got the same purity as promised.
- Preserving cost: if you have physical gold, you will invest in bank locker etc for secure storage.
- Risk of theft, mishandling, etc.
To avoid all these problems, we have an alternative way of investing in GOLD, called Gold ETF’s, read it next …
Read about Gold Funds (Click here)
What is GOLD ETF’s
Gold ETF’s are a special type of ETF’s (Exchange traded funds), ETF are not covered here, but view them as open ended mutual funds, which are traded on stock exchange just like normal stocks. You can buy units on Stock Exchange, each unit is equivalent to one gram of gold or .5 grams of gold.
So if you want to invest in 100 grams of gold, you can buy 100 units of a GOLD ETF from the stock exchange, you can buy it just like any share from the stock exchange.
gold ETF’s price changes real-time, as they are traded on the stock exchange like shares.
Watch this video to know why there will be an increase in gold investment in upcoming years:
In India currently, there are Five Gold ETF’s.
– Benchmark Gold ETF (Stock Code on NSE/BSE: GOLDEN) (the first one in the country)
– UTI Gold ETF (Stock Code on NSE/BSE: UTGOLD)
and other 3 from Reliance, Quantum and Kotak listed on NSE.
Gold has returned 38% in the last 1 year and 170% in the last 5 years (absolute). And it looks great in the future.
You can easily enter and exit from GOLD ETF’s unlike physical gold.
How investing in Gold ETF’s scores over Physical gold like Bars or jewellery?
Comparison of GOLD ETF’s vs GOLD BARS vs Jewelry
Consider you are investing Rs.1 Lacs in Gold, there are 4 parameters to judge.
If you purchase Them
– Jewellery: Making charges of 15-20%
– Gold Bar: 10% to 20% mark up charges by banks.
– Gold ETF : 1.5-2.5% entry load
If you Sell
– Jewellery: 10% – 20% is lost due to Purity issues.
– Gold Bar: Banks do not take it back, so the premium paid at the time of purchase is written off.
– Gold ETF: Brokerage of 1% or even less.
Maintenance Charges
– Jewellery: Insurance charges and locker charges (if you put it in the locker)
– Gold Bar: Insurance charges and locker charges (if you put it in locker)
– Gold ETF : 1.5 – 2.5 %
– Jewellery: Long term capital gain of 20%, but after 3 years. 1% wealth tax
– Gold Bar: Long term capital gain of 20%, but after 3 years. 1% wealth tax
– Gold ETF: Long term Capital tax of 20%, but after 1 year. No wealth tax
Note: Gold is taxed at 30% if held for less than 1 year in any format.
So on all these 4 scenarios, GOLD ETF’s score heavily over other means of investing in GOLD.
To read more on why gold is a must buy now and how silver is much better than gold, read https://silverstockreport.com/
I would be happy to read your comments or disagreement on any topic. Please leave a comment.