JAGOINVESTOR

Personal Finance quiz – For all types of investors

Posted on November 6, 2008February 6, 2019 by Jagoinvestor

Today Let me ask some questions on personal finance to you which you can answer to see how much you understand things in investing. This small quiz will help you and me know where you belong to.

How much have you learned? I request you to give answers of the questions as a comment back to this article. I will announce the winners after some days. Also please mention your reasoning about the answer.

Personal Finance quest

Information : I have started a chat box on this blog, please see the right hand side to see it, you can post your questions or queries to it and I would try to answer them as soon as I see them.

Q1. Ajay and Priya are married and both of them earn 40,000 each. They earn total of 80,000 and there monthly expenses are around 20000-30000 per month. In case they have to opt for a Insurance plan. which one they should go for?

a) Term Insurance
b) Endowment or Money back plans
c) ULIPS
d) No Need to take Insurance

Choose one option among these and give the reason.

Q2. Ajay lends 1,00,000 to Manish on following conditions.

He will get 7,000 per year for next 30 years.
He will receive whole 1,00,000 back after 30 years.

What is the best way for Manish to utilize this money and make some profits for him too if possible.

No options here, you should give a detailed description of step he should take.

Q3. Your friend wants to enter magic world of Stock markets. He/She is determined and very confident that he/she can make huge profits. What will be 3 things you would say to him/her.

For an example : The first thing I would say to him/her is “Don’t concentrate much on making profits, rather concentrate on avoiding losses”.

What are the 3 things you would say to him/ her.

Q4. There are two strategies of investing in Stocks of blue chip companies in Stock markets. Time Frame : 2-3 months.

Strategy 1 : Can give profits upto 50%, or loss upto 50% with equal profits. (Assume the stock is very volatile)

Strategy 2 : Can give profits upto 10%, or loss upto 10% with equal profits. (Assume the stock is very less volatile)

Which Strategy will you choose? You are free to make your assumption

Note : Please answer these question to help yourself and see if you actually deal with these situation. What kind of thinking you have? What kind of advice can you give to someone? And more than that, to learn.

I will review all the answers and reply them. Also I would choose the best answer in some days.

A reply to one mail

Posted on October 16, 2008February 6, 2019 by Jagoinvestor

This post is most probably the one on which i didnt worked hard . This is just an email reply from my side to one of my friend who queried me regarding his Endowment Policy package which an agent has created for him .

The policy looks like this … 15 small polices of 1,00,000 each which will mature one by one every year after 27 years and will act as yearly pension in his old age

His mail :

>>>

On Wed, Oct 15, 2008 at 9:37 AM, ajay patel wrote:

15 policies of Rs. 1 Lakh each, starting from sept 2007, first policy matures in 2034 and others follow every year from there on.
Cover of 15 Lakh is for life time. There is an extra Rs 500,000 accidental insurance along with it till the age of 70(2053) (if the world exists till that time).
Annual premium of Rs. 42,000 till 2034, a total amount of 3,400,000 will be received from maturity of these policies.

Say after ten years, I see myself earning around 2.5-3 lacs per month. with one child (if i get married :))

My Reply :

now lets see some of the facts for you to ponder .

Starting from 2007 you are paying 42,000 each year till 2034 (for 27 years) . You will receive money starting from 2034 – till 2049 (15 years , each policy matures) .

Points to note :

– You are paying 42,000 and then its locked for 27 years
– You are getting maturity value of each policy per year , just like a annual income(around 2.25 Lacs/year ie : 34/15 , which is not taxable (you keep all the money).
– You are getting Tax exemptions under sec 80C for this.

I think these are the points you have to agree , because they are not opinion , they are facts .

Some of the flaw or issues with this plan are following , which you never considered at the time of taking this .

– The premium you are paying each year equals to your current monthly salary , also you said that you see your self earning 2.5-3.0 lacs (6 times , your current) per year just after 10 years from now . i am not sure what kind of figures will it be after 27 years . At that time , the money which you get from the policy should not last even 2 months . Considering your expenses currently at 25,000 per month (considering you are married and have children) . the same expenses will rise to 1.2 lacs assuming 6% inflation (also remember that the expenses will keep rising each year ie : 1.66 , 1.77 , 1.9 … 4.2 lacs , whereas the money you get each year will be around constant 2.25 lacs only , this may look unimaginable , but ask your father to grandfather about the monthly expenditure of family before 25 years , i am sure it should be 5% of current, people always forget inflation).

– The insurance provided by this policy is so less that you are highly under insured . What can your loved one do with 15 lacs today ? Will it be sufficient to replace you ? If you consider time after 10 years (when you think you will earn 2.5-3 lacs / month , will the insurance money be sufficient to cover the dependents ? When you will be of age 60+ , the insurance amount is able to meet not more than 9-10 months expenses .

Having this policy is as good as not having it . The issue is not that Can there be policy better than this? ,The main problem is what kind of value is this giving to you . Is the benefit provided by this policy after 27-42 years is much less than than the pain you are getting by paying hefty premium now .

With the same money (42,000) , let me see what can i plan for you with same money .

Lets first take a most conservative way (which is undebatabely safe).

You take an insurance of 50,00,000 (50 lacs) for 30 years and pay a premium of just 10.5k per year . You are left with 32k per year which you put in

1. PPF account

In PPF the money 32k @8% will become 2,55,000 in 27 years and you will get this money every year (total 38 lacs till end) , till age 66 ( In Endowment policy it was 2.25 lacs)

2. In MF considering 12% return

32k invested will become 6.83 lacs in 27 years , so you invest every year 32k and get 6.83 lacs just after 27 years of payment . so it can provide a regular income of 6.23 lacs after 27 years for continuous 15 years till you are 66 .

3. In Mutual funds considering 15% return

The amount would be 13.93 Lacs , every payment of 32,000 will become 13.93 lacs.

Question: How realistic are these mutual funds returns ?
Answer : Over the history no asset has returned more than equity over long term . India Equity markets have returned 17.5% CAGR annually (since inception) . 15% is a very realistic return considering the money is invested for long term like 15+ years . Equity investments risk are inversely proportional to tenure of investments .

After 30 years you will not even need Insurance , because this money will be available every year . and i am assuming that you will earn enough till than that you don’t need insurance .

Some other things to ponder are :

Investing in your Endowment policy does not give you any flexibility of stopping or missing your premiums . In case of PPF or mutual Funds , you can be very flexible and stop for 2 years if you want money to be utilized some where else .

The plan which i told you has everything which you had in that endowment policy , even more than that . its like Buying Nokia 2600 @20,000 when you have iPhone available at same price , you just didn’t knew where you can get it 🙂 . Ok , i know that was pathetic analogy , but i need some platform to show that i can think .

So better stop those policy and take the loss of premiums which you paid , anyways you are not going to be affected now , and life will be normal as it was .

I have done nothing extraordinary here , but some calculation based on some common sense , which is not common .
disagreements are welcome .

– manish

– Show quoted text –

—
Manish Chauhan
Bangalore
https://finance-and-investing.blogspot.com/

Lets understand some basic things here . No matter what people tell you or design things for you , Always calculate and apply the simple formula’s which will give you certain numbers, which can be used as benchmarks by you .

Some must know formula’s : https://finance-and-investing.blogspot.com/2008/09/3-most-important-formulas-you-should.html

Please post your comments .

Situation of Stock Market on Oct 9, 2008

Posted on October 8, 2008February 6, 2019 by Jagoinvestor

Bloodbath in Stock Market

As I write this article on Oct 9, 2008, Sensex is below 11000 (10850) … Most of the Mutual fund investments returns (since peak of Dec 2007 – Jan 2008) must be down by 40-50% (lump sum investment) and 25-35% (if SIP). Looks like Sensex is heading towards it original value of 6000 or 7000 which will bring losses to 60+%.

Though most of the investors know in theory what to do in these situation, most of them will still not buy, Now the physiological investing problem happens, For long term investors its the best time to invest, but no one will take the plunge after burning there hands so badly.

Do Indian Markets have many reasons to Decline further?

Remember, the global markets are looking bad, not Indian. Indian markets are just following US and European markets because they are the “Big Boss”.

The US markets and European markets are the culprit for the global slowdown. The sub-prime crisis related issues will have deep impact on US and global investment banking firms. India or other Asian countries are just bearing the pain along with global stock markets.

Yes we are in Bear markets, in fact every country stock markets are, but the bearishness of markets are exaggerated because oh high oil and US sub-prime crisis and subsequent Bank Failures.

India is not short of its local good news like

Nuclear deal

Stable growth of more than 8% p.a

Inflation now coming down from its high (and as Oil comes down, the inflation will come down further)

Strong Corporate Earning and Many companies on the verge of setting global standards (Reliance starting its oil production soon, etc etc)

Once things are in control (should be soon, but no one can be sure), another bull market should be more exciting than the last one. Prices will move like rockets and people who will benefit most will be one who will do investments in these down markets.

Is it the right time for investments?

This questions was answered by many pundits when Sensex was around 15,000-16,000. Some said YES, some said NO. People who did investments must be thinking why they did it and people who did not must be happy for not investing that time. The scenario could have been exactly opposite if markets would have gone up.

So what do you do now?

The best idea is to invest a part of the money now, If the markets go down from here, You still have another part of your money in hand which you can invest later and again invest more if it goes down further. It will ensure that your average cost is not very high, and a decent run in markets will result in profits.

If markets go up after you buy some mutual funds or shares, you at least are in profit and not LOSS. which is a privilege now a days in Market. Once there is a good confidence that markets are stable and wont fall further, you can then do rest of your investments.

Remember, Don’t try to make profits in stock markets, just try to avoid losses and make sure that you preserve your capital. If you can do that much, profits will be at your feet.

As Warren Buffet said “We need to take very less correct decisions in Life, as far as we make sure that we don’t take many wrong ones”

3 most Important formula’s you should know – Compound interest, CAGR and Annuity calculator with example

Posted on September 2, 2008February 6, 2019 by Jagoinvestor

1. Compound Interest

This formula is often used to calculate the returns some investment has given. The main concept in compound interest is that interest gets accumulated with the total principal amount and that interest again earns interest over the years. Which makes it very powerful.

Compound Interest, CAGR and Annuity - Important formula's

**Formula : A = P * (1+r/t)^(nt)**

Where,

P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

Example 1 :

Investment = Rs.10,000
return = 9%
investment period = 8 years

Total amount = 10000(1+.09)^8 = 19925.63

Example 2 :

Sensex returned 17.3% return over 29 years since its inception in 1979. What would be worth of Rs 10,000 invested that time.

A = 10,000 * (1+.173)^29 = 1022450.64 (10 lacs)

You can see that a small amount has actually grown to 100 times.

Compound interest Calculator :

https://math.about.com/library/blcompoundinterest.htm

2. CAGR

This tool is very important because it helps in comparing two differnt returns from two investments, you can calculate how much an investment has returned per year on compounded basis, Its just the opposite of Compound interest

Formula : CAGR = (A/P)^1/n – 1

where:

A = Final amount
P = amount invested
n = Number of years

CAGR can be a great tool to compare two different investments and there returns.

Example :

A. 10,000 invested in a XYZ mutual fund for 2 yrs became 20,000
B. 50,000 invested in GOLD for 7 years became 4,00,000

Which investment has given more returns?

Here the main doubt is that how to calculate which one is better .. the amount, tenure is different. So in this case we calculate and see CAGR, one with more CAGR will be good.

A) CAGR = 41.42 %
B) CAGR = 34.59 %

So, investment in A is better than B. Which is –

CAGR calculator :

https://www.moneychimp.com/calculator/discount_rate_calculator.htm

3. Annuity

This formula is very very important one, in our daily life we come across many situation where we do a fixed payment at the fixed interval, and we want to calculate the returns, but we don’t know how to do it .. Example can be

Monthly payments in Mutual funds through SIP
Yearly payment in a PPF.

Or any investment at a fixed inteval over some years. In that case we calculate the Final value using formula called Annuity.

**Formula : A = P * [{(1+i)^n – 1 }/i] * (1+i) (if payment are being made at the start)
(it will be P * [{(1+i)^n – 1 }/i] if payments are made at the end of the year)**

Where :

A = final amount
P = installment each time
n = total number of installments
i = interest rate for that tenure (example if yearly return is 24%, but payments are made monthly then i = 24/12 = 2%)

Example 1 :

Robert invests 10,000 each month in a mutual fund for 10 years and the annual return was 18%, what will be his final corpus?

Here as payments are monthly, total payment will be 10 * 12 = 120

so n = 120 and i = 1.5 % (18/12)

A = 10,000 * [{(1+ .015)^120 – 1}/.015 ] * (1+ .015) => 40,39.241 (40 lacs)

Example 2 :

Vikas is planning his retirement, and planning to invest 5,000 per month in a Mutual fund for 20 yrs where he expects a return of 15%, then take out all the amount after 20 yrs and then put it in a FD for 15 yrs which gives him 9.5% return.

Here, we there are two parts

A. He makes monthly payment for 20 yrs (here we have to apply annuity)
B. then he takes the money out after 20 yrs and then put it in FD for 15 yrs (as this is one time payment, here we will apply compound interest)

A ) n = 240 and i = 1.25% (as the payment are monthly)

His money after 20 years = [5,000 * (1 + .0125)^240 – 1) / .0125] * ( 1.0125) = 75,80,000 (75 lacs)

Now he invests this money into a FD for 15 yrs at 9.5%.

B) Final amount = 75,80,000 * (1.095)^15 = 2,95,00,000 (2.95 crores OR 29.5 millions)

So his final corpus will be 2.95 crores.

4 mistakes in investing which you should avoid as an investor to build a healthy financial portfolio

Posted on July 12, 2008February 6, 2019 by Jagoinvestor

If you want to save money it needs to be invested somewhere. But lot of people makes some mistakes in investing which seems very small at that time but they can prove a disaster to your financial life.

Today in this article I’m going to tell you 4 common mistakes in the investing world that you should avoid as an investor.

Investment mistakes

1. Take inadequate or wrong Life Insurance

This is my favorite, because it is the mistake done by majority of people, Most of the people are highly under insured. By default, a person must be at least covered for 10-15 times his annual expenses. So a person who has a yearly expenses of Rs 2.4 lacs (20000 per month), must have a cover of around 25-35 lacs at least.

But they have insurance like peanuts, 2 lacs, 5 lacs, or 10 lacs. The biggest reason for this is that they take wrong type of insurance. Most of the people need Term Insurance , but they end up with Money Back plans.
to read more at :

2. No Diversification in Investments

Most of the people don’t pay good attention at diversification. They are either in Debt or Equity. They must understand that they have to diversify along different types on investments to minimize risks and also to boost up there returns.
Some people have only FD’s, PPF’s or NSC in there portfolio, then there are people who hold only Shares or mutual funds. While the former misses on the returns, the later on is exposed to high risk. Combining both of them can decrease risk, increase stability of returns.

3. Tax investment because of Last month rush and not Financial Planning

Most of the people rush for tax saving only in the month of Feb-March, when they get a letter from company saying that they need to submit proofs of investments under section 80C, and that’s the reason why people end up taking wrong products, just because they don’t have time to plan there investments. The best thing is to start planning for tax saving right at the start of financial year.

4. Starting Late

This is another big mistake people do, they do not start investing at the right time. A lot of time people actually can save some money but they feel that its not worth to save a small amount, they think that when they will be in condition of saving enough per month, that would be the right time to start, which is far from truth.

Watch this video learn more about 4 biggest financial mistakes:

Consider this:

Ajay Started his career at 22. He has worked for 8 yrs and now he is 30 yr old, He wants retire at 60, and can invest for another 30 yrs. He want to generate 4 crores for his retirement. He has 3 choices

1. 6000 every month for next 30 yrs.
2. Invest 10,000 every month for next 7 yrs and then leave it to grow for another 23 yrs.
3. Invest 20,000 per month for 3 yrs and leave it for 27 yrs.

Guess which choice will give him maximum money , The one where he is investing more for less years !!! . Yes .. The corpus generated is as follows:

1. 4.2 crores
2. 4.59 crores
3. 5.11 crores

So the idea is, start early and invest more … remember:

Start Early, Invest less = Start Late, Invest a Lot

Btw, Had Ajay invested 4,000 per month right from the time when he was 22, and invest for next 8 yrs and waited for that money to grow till retirement, He can generate more than 6.5 CRORES !! That’s better than all the 3 choices 🙂

Also see this example :

Considering return of 15% per annum from Diversified Equity Mutual fund, If you invest 10,000 per month for 10 yrs and then leave it to grow for 20 yrs, your investments worth will be 4.5 crores, But before that if you also invested 5,000 for 5 yrs and then 10,000 for 10 yrs, your money will be 7.5 crores.

How to evaluate Returns from Investments

Posted on June 15, 2008August 6, 2019 by Jagoinvestor

Which return is better return, 40% or 30% ?

There is no doubt that 40% is more better return. But is it a right way to judge the return just by seeing the number. we ignore another important factor called as “RISK” involved. In most of the cases, people really don’t consider evaluating the return in relation to RISK taken to earn that kind of return.

Which is better?

1. 30% with High risk
2. 20% with moderate risk

In this case , 2nd is better than 1st , as the Return per unit of risk is better than the 1st case. (considering High risk is 3 units , and moderate is 2 and Low is 1 .

So the actual measure of return should be, Return per unit of risk

REAL RETURN = ABSOLUTE RETURN / RISK TAKEN

There are many balanced mutual funds which have given little less return than diversified equity funds , and hence can be called as much better investment tolls because there was much lower risk involved with them , in case there was any fall in markets , these mutual funds would have fallen less than equity funds. Many mutual funds advertise there products only on the basis of returns and don’t care to tell investors that there is high risk involved with the products.

If you are given 2000 for climbing a tree and 5000 for jumping from one building terrace to another , the first choice is much better. In that case you don’t go for the second option just looking at 5000.

If today all banks start giving 12-15% assured return on Bank deposits, Equities investments will fall to great extent , because bank deposits will have much better returns considering the risk involved.

I would be happy to read your comments or disagreement on any topic. Please leave a comment.

Things you didn’t knew

Posted on June 12, 2008February 6, 2019 by Jagoinvestor

There are many things we hear and believe , but they are little different in reality, which helps if we know.

– Do you know that When you take an SIP for 6 months or 1 years or for any period , the first installment (which you make by cheque) is not counted for inside the tenure of your SIP. So if you take a SIP for 6 months , you make 6 payments other than your initial payment with cheque , so total is 7 payments.

– The short term capital gain period is 1 yr , means 365 days , but it does not work exactly that way , its 12th month other than your buying month. Means if you buy shares or MF on 12th May , 2008 and sell on 13th May , 209 it is still short term capital gain , to call it long term capital gain , it must see it after 12 months after May , 2008 (your month of buy) . which means you shall sell it on or after 1st June 2009.

– Suicide is also covered in Life Insurance after 1 yr of policy (atleast its there in my policy with SBI Life Insurance).

– ULIPS : The deductions availed under sec 80C is taken back if you surrender your ULIP before 5 yrs. If you surrender your policy in 4th or 5th year , then all hte premium paid till date will be added to your salary for that current year and you will have to pay tax on that too. ULIPS just put restriction on paying of premium fr the first 3 yrs, but offer tax benefit under 80C if you hold it for minimum 5 yrs.

– If you repay your housing loan by taking another loan , you can continue to claim tax benefit on the interest amount paid for new loan under sec 24.

– Tax deduction is available for the prepayment charges paid for the home loan .

– If you face any problem or defecieny in service from banks, you can complain at www.bankingombudsman.rbi.org.in same as

– Dividend distribution tax is levied on the Dividend which you recieve , and it also affects the fall in NAV . So NAV falls not just to the extent of the dividend declared , but also by the tax which mutual fund company pays to govt (12.5% on dividend + 2.5% surcharge also , under sec 115-O )

I would be happy to read your comments or disagreement on any topic. Please leave a comment.

Importance of financial management – All about investment and different policies

Posted on May 2, 2008February 6, 2019 by Jagoinvestor

Why do we work? Why do we go daily to work and that too for years?

Some people love their work and they enjoy what they do and that’s a good thing. But as per my understanding, every one goes to work for there livelihood, because we want to earn and generate wealth over long term. People want to create wealth, want to buy home and car, they want to go for vacations, they want to accumulate millions in 10 or 20 years.

Financial management

People give 100% time to there work, but not even 1% for the motive behind the hard work they put, which is to generate long term wealth, for buying home, children education.

I have seen people who earn well, but fail to invest it properly, in fact in a wrong way, and hence they loose on that. Whats the use of working so hard if you cant invest it properly to achieve you goals, Is there any use of your working for so many years, and after all we work for money, and if we cant manage that money or don’t take some serious time to manage it, I personally consider it as waste.

One of my friend has taken a ULIP policy to save tax without knowing what it is. The insurance he gets on that ULIP is 1.25 lacs with yearly premium of 25,000 with health insurance premium of 4.5k.

he didn’t pay any attention to what he is buying, Does he really need it, how is it going to be beneficial to him.

One of my other friend took a Endowment policy with insurance of 10 lacs for 15 years with premium of around 90,000, when i asked her, how many financial dependents she had, she was clueless and when I cleared what i am asking she said, “No one”.

People don’t take any interest in knowing/learning/asking about financial instruments from anyone and take idiotic decisions, loosing there hard earned money. It does not take 1 hr / week or 4 hrs/month or 1 day / year to take fair decision (if not best) regarding your finances.

If people start giving 1% time to there investments and finances and 99% to there work compared to 100% time to work, they can do much better. A person earning 20,000 per month can generate more wealth than a person earning 50,000/month, with better investment technique.

“Money does not grow just by investing more, but disciplined and great investing technique.”

What do you think is the biggest reason for people in India for not taking financial planning serious?

4 reasons why you should consider gold as an investment option for next 2 years

Posted on April 11, 2008November 8, 2019 by Jagoinvestor

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.

gold investment

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 %

Tax Implications

– 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/