Does investing in gold live up to the hype?

By admin | Mar 16, 2021

Gone are the days when gold was used as a type of currency, but it still continues to hold a strong position in today’s society. In India especially, gold is perceived as a symbol of stature and wealth. But does gold really live up to the hype surrounding it? Does investing in gold ensure a fail-safe way to enhance one’s wealth?

If you’re looking for answers to these questions, here’s what you need to know when it comes to investing in gold.

How to buy gold investments?

There are 3 ways through which you can invest in gold:

  • Physical gold 
  • Gold ETFs 
  • Sovereign gold bonds

If you want to buy physical gold in the form of gold jewellery or gold coins, all you need to do is walk into a jewellery store with your PAN card. However, if you are looking at buying physical gold purely from a point of investment then it would be wise to buy gold coins instead of jewellery. This is because gold jewellery has making charges, which you will not recover when you sell it.

Gold coins on the other hand can be sold for the market value. However, the only issue with buying physical gold is security. You will need to make arrangements for safekeeping either by renting a locker in a bank or a safe in your home.

If you don’t want to undergo the hassle of safekeeping gold, Exchange-Traded Funds (ETFs) and Sovereign Gold Bonds are your best options. With ETFs, you don’t have to worry about theft or storage. You can easily buy or sell them by getting in touch with your broker after opening a broking and trading account.

Some examples of listed Gold ETFs are Goldman Sachs Gold ETFs, Kotak Gold ETF, SBI Gold ETF, among others. Similarly, you can also purchase Sovereign Gold Bonds in a similar manner by selecting from a range of listed shares.

When is the right time to invest in gold?

Gold has become a viable investment instrument, particularly in times of the current pandemic. Even in the last few years, gold prices have shot up and seem to be showing no signs of stopping. While for many this is great news, others are eyeing the ever-soaring prices of gold with scepticism.

Industry experts say that there is no right or wrong time for buying or investing in gold in India. While the purchase of physical gold in the form of jewellery, coins, and bars is more prevalent traditionally, in recent years, Gold Sovereign Bonds and ETFs have caught the fancy of investors.

If you want to further reduce the risk, experts suggest that you break your total planned investment in gold into smaller amounts and invest it over a span of time as the price keeps varying. This helps you reduce the risk of buying all your gold at a peak.

Also, a healthy investment portfolio should include anywhere between 10-15% in gold investments as it provides stability to your portfolio which is essential to achieve your long-term financial goals.

This is however subjective and every investor will need to create a financial plan that takes into account their financial goals, risk tolerance, investment horizon, and current portfolio composition.

Is it worth investing in gold?

For a conventional investor who’s looking for safety, liquidity, and profitable returns, gold meets all these criteria. Gold is considered a safe-haven asset in times of uncertainty. However, gold doesn’t generate any returns but is an effective tool against inflation as gold values do not deter with fluctuating stock values.

If you’re an investor looking to diversify your portfolio, then gold is a good asset to add to the mix. Gold often moves in the opposite direction of stocks i.e. if the stock market drops then you will see an increase in gold prices.

Like every other investment, gold too has its list of advantages and disadvantages. In the end, gold can make a fine addition to your portfolio as long as you know why you include it and if it will help you with your long term financial goals.

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