6 Ways You Can Begin Investing in Gold at the Right Time

5-July-2021 |

 

Introduction

Gold investment in India is a traditional practice. It is considered one of the best financial investments to help you overcome a short term financial crisis. However, changes in the economic system have influenced gold prices. And, prior knowledge about investing in gold is necessary to make good profits. There are different ways to begin investing in gold. We shall discuss why investing in gold is important and what are the different ways to start at the right time. 

 

Why should you invest in gold?

Investing in gold has many benefits. Here are few reasons to investing in gold:

 

  • The positive effect of inflation

    The value of any asset depreciates over an increase in the inflation rate. However, in India, history shows that despite the fluctuations in inflation rates and barring a few dips during unprecedented circumstances, the price of gold has sustained its level and certainly kept increasing.

 

  • Liquidity 

    Purchasing gold is simple and easy compared to any other asset. For any short-term emergencies, gold can be sold or mortgaged for cash instantly. 

  • Long term value 

    Gold has been recognised as possessing a certain value every day. Any amount of gold purchased years back has a good value now and will continue forever. It is the best store for value. 

 

What are the ways to invest in gold?

Gold can be owned in two ways; physical form and paper form. Physical form refers to jewellery, coins and gold bars. Paper form refers to exchange-traded funds, sovereign gold bonds etc. The different ways to invest in gold have been elaborated as under:

 

  1. Jewellery – Purchasing and possessing gold as jewellery is a conventional form of investment. You can purchase gold and reserve it for any emergency purposes. However, when you consider it as an investment, there are certain challenges. The making charges involved in purchasing may not be included while selling your jewellery at a later date. When there is a sudden increase in the price of gold over the years, you are in luck! Ensure you keep monitoring the prices and purchase a sizable quantity when the prices strike a low. 

  2.  

  3. Gold coins –The Government of India has launched minted coins with different denominations such as 1 gram, 2 grams, 5 grams, 10 grams and gold bars as 20 grams. The coins and bars have tamper-proof packaging having a hallmark of BIS standards. It is distributed through banks and post offices. You can purchase it directly from there. The MMTC (Minerals and Metals Trading Corporation) offers the option of buyback for these gold coins in the majority of its outlets. The purchase will be based on the prevailing gold price. 

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  5. Gold Savings Scheme – If you are a beginner at investing in gold, this is an ideal option. You have to save and deposit a specific amount every month for a designated period. When the term ends, you can purchase gold equal to the amount deposited along with a bonus. The gold price for purchasing is considered at the value on the maturity date. 

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  7. Gold Exchange Traded Funds – It is a cost-effective form of gold investment. Purchasing and selling gold investments takes place in the BSE or NSE stock exchanges with gold as the underlying asset. If you have good knowledge and experience in handling financial markets, you can begin investing in gold by purchasing ETFs. There is a lot of transparency in the price, and you can avoid the making and other charges on physical gold. You can either buy ETFs with a lump sum amount or as a Systematic Investment Plan. If you do not have sound knowledge of financial markets, you can always seek expert advice or choose a comprehensive alternate product for all your needs. For example, the ULIP policy (Unit Linked Insurance Plan). 


    ULIP plan is a type of endowment plan with dual benefits; insurance and investment. One portion of the premium is used as a life cover, and the other portion for investments in equity, debt or hybrid funds. With adequate research, the insurance companies provide a list of the funds to invest in. It is considered a secure platform. Based on the risk tolerance, you can choose the fund. Tata AIA Life Insurance offers a variety of such funds for the benefit of the policyholder. The premiums paid towards the ULIP policy and the returns derived qualify for a tax deduction# and exemption# under the Income Tax Act, 1961.  

  8.  

  9. Gold Sovereign Bonds – Gold sovereign bonds are issued by the RBI (Reserve Bank of India) on behalf of the Government of India. It has an interest rate of about 2.5 per cent annually. The bond is designed for a policy tenure of eight years and has a five-year lock-in period. Though the interest rates are low, it holds as a good long-term savings plan. If you are a beginner looking for safe gold investment options, then these bonds are ideal for you. 

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  11. Digital Gold – You can invest in gold online by purchasing jewellery, coins or bars. There are no making charges, and you can liquidate it easily. It is also being offered in mobile wallet platform such as Paytm.

 

 

Conclusion

Having seen the different ways of investing in gold, you must take an immediate step for handling exigencies. Before you invest, it is necessary to evaluate your financial status, expenses, and the extent to which you can afford to invest in gold. Strike this investment at the right time to make maximum profits. Understand that gold is just not a piece of wearable jewellery; it is an effective investment tool too!

 

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