Throughout history, gold has been a popular commodity and has been used as a currency. Currently, gold has become a status symbol and a preferred investment option. In India, gold investment is quite common. Gold investment is closely tied to social and religious traditions. During festivals, religious ceremonies, and occasions like childbirth and marriage, gold is bought or gifted.
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. In this article, let's explore why gold investment is the preferred investment option.
Why Invest in Gold?
If you don't invest your savings wisely, your savings plan won't yield the desired results. Consider your financial goals and risk appetite when choosing investment options. The following are some of the benefits of investing in gold:
1. Hedge against inflation
The impact of inflation on your returns must be kept in mind when investing. Inflation can be hedged with gold investments. The value of a currency decreases as a result of inflation. In India, inflation sometimes exceeds interest rates, resulting in a negative return on investments.
2. Gold is tangible asset
Investors perceive gold as a safe asset because it is tangible. In comparison to other tangible assets, such as real estate, gold is much easier to purchase. As a result of this feature, gold is not susceptible to hacking or other misuses that are associated with digital assets.
3. Price stability
The gold price is relatively stable compared to other options in the market, and it does not go down by a large margin even during times of crisis. When the financial market is in a crisis, people tend to invest in gold, which rises quickly.
Compared to the equity market, when there is negative news about a company, the price of any stock can even drop to zero. With gold, this usually never happens, and it always maintains its value. Due to its price stability, gold has always been a preferred choice for investors.
4. High liquidity
Another advantage of gold investing is its high liquidity. The process of selling gold is not complicated, whether you purchase it in the form of gold online or in the form of gold bars. It might be difficult to sell physical assets, such as property, when you need money quickly, but you won't have difficulty selling gold. Physical gold and gold in the form of digital gold or gold ETFs can be sold easily.
A few aspects to remember
In addition to the benefits discussed above, you should keep a few things in mind when investing in gold.
1. Investing in gold jewellery is generally not a wise decision. If you decide to sell it, you may get a lower price due to impurities and jewellery-making fees which aren't always refunded. As a result, you will have a lower return on investment. Buy gold coins or bars, or invest in gold online.
2. Gold investment does not offer steady income streams. Your savings plan should include different types of products that serve varied goals. Tata AIA Life Insurance offers products that can help you secure a steady income in retirement.
3. Gold is considered a relatively safe investment. However, like all investments, gold also comes with inherent risks. Gold prices are also cyclical, like all other commodities. Gold investment returns in India have seen their highs and lows, and sometimes, negative returns.
Gold investment options in India
Gold can be invested in a variety of ways. The following are some of the available options:
1. Physical gold
Gold jewellery, bars, and coins are all physical gold you can buy from any jeweller. Coins and bars are better investments than jewellery.
2. Digital gold
Like stocks, you can buy e-gold online through an exchange. Like other dematerialised assets, gold is held in your Demat account.
3. Gold ETFs
There are gold Exchange Traded Funds (ETFs) on stock exchanges that you can buy and sell. A gold ETF is a mutual fund that invests in physical gold.
4. Gold mutual funds
It is also possible to diversify your savings plan with gold mutual funds. Like the two options above, investing in gold mutual funds does not require a Demat account.
Conclusion
In our culture, gold investment plays an integral role. Gold investing remains a popular choice in modern times, too. With your overall financial goals in mind, include gold in your investment and savings plan. You can consider investing in physical gold, such as coins and bars, or digital gold, such as ETFs and mutual funds. Suitable investments can lead to wealth creation in the long run
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