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Throughout history, gold has been a popular commodity and was used as currency in the past. In current times, gold is a status symbol and a preferred investment option.
Gold investment is quite prevalent in India. Investing in gold is intertwined with our social and religious customs. You would have also bought or gifted gold at festivals, religious ceremonies, or on occasions like childbirth and marriages.
As per the World Gold Council, Indian households have accumulated approximately 25,000 tonnes of gold with them,making them the largest holders of this yellow metal in the world.
However, apart from the emotional appeal, does gold as an investment make economic sense?
Your savings plan won't yield the desired result until you invest your savings wisely. Always choose your investment options with your financial goals and risk appetite in mind. Gold as an investment option has the following benefits:
1. Hedge Against Inflation
When you invest, you must keep in mind the impact inflation will have on your returns. Gold investment acts as a hedge against inflation.
Inflation lowers the buying power of the currency. In India, inflation exceeds the interest rates on some occasions, making the actual return on investments negative.
2. Multiple Options to Choose From
Your investment in gold does not have to be physical. You could choose to invest in gold online also. Apart from the physical and virtual investment choices, there are multiple asset classes for gold investment.
When you plan to buy gold in the physical form, the choices range from jewelry and coins to bars.If you wish to invest in gold online, your choices are digital gold, Gold ETFs, or Gold Mutual funds.
Each investment option has its merits. You can pick the one that suits your risk appetite and investment and savings policy.
Buying gold online in various forms eliminates the security and purity problems associated with buying physical gold as an investment.
3. Helps Diversify Your Portfolio
A diversified portfolio reduces your investment risk. When you make your savings plan, include products that are not closely correlated to each other in your portfolio.. Investment in gold reduces the overall volatility and risk of your portfolio.
4. High Liquidity
High liquidity is another advantage of investing in gold. Whether you invest in gold online or buy it in the physical form, selling gold is not difficult. When you need funds quickly, selling physical assets like property might pose a challenge but not gold. You can find buyers easily for physical gold and gold you own in the form of digital gold or gold ETFs.
Though gold investments offer the benefits discussed above, you should remember a few things when choosing to invest in gold.
1. Gold jewelry is not a good choice for investment purposes. When you want to sell it,
you may get lower value due to impurities and jewelry-making charges which are
not always reimbursed. This will lower your return on investment. Buy gold coins
or bars or invest in gold online.
2. Gold investment does not offer you a steady stream of income. Your savings plan
should include different types of products that serve varied goals. Tata AIA Life Insurance
has products that can help you plan your retirement with products that provide a steady flow
3. Gold is considered a relatively safe investment. However, like all investments, investing in gold
also comes with some inherent risks. Gold prices are also cyclical like all other commodities.
Gold investment returns in India have seen their highs and lows, and sometimes, the
returns have been negative.
You can invest in gold in different ways. We give you a brief overview below of a few of the available options:
1. Physical Gold
You can buy physical gold in the form of gold jewelry, bar, or coins from any neighbourhood jeweler. Bars and coins are more suited for investment purposes than jewelry.
2. Digital Gold
You can buy e-gold online through an exchange, just like stocks. The gold is held in your DEMAT account like other dematerialized assets.
3. Gold ETFs
You can buy and sell gold Exchange Traded Funds (ETF) on the stock exchanges. Gold ETFs are mutual funds that invest in physical gold.
4. Gold Mutual Funds
Gold MFs can also be a part of your diversified savings plan.. Investing in gold MFs does not require a DEMAT account, unlike the two options listed above.
Gold investment is an integral part of our culture. In modern times, too, investing in gold has not lost its shine. Make gold a part of your investment and savings plan with an eye on your overall financial goals.
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This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. This blog is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
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