Since ancient times, gold has been a symbol of wealth and prosperity. Investing in gold has been one of the earliest ways of portfolio diversification. People still see buying gold as a smart choice to keep their investments safe from market changes.
Whether new to investing or having years of experience, you should consider holding about 5-10% of your total portfolio in gold. The one primary reason why gold is regarded as a good choice of investment is it is a metal with never-diminishing value. So in this investment guide, we will cover some of the significant reasons to invest in gold as per the market and what you should consider while investing in gold.
Why Should You Consider Investing in Gold?
Gold is a popular investment choice for a variety of people. Gold has been passed down through the generations for certain individuals; it is crucial to keep it safe because it might be useful during the marriage or act as a security asset in the future. In contrast, others take the help of professional financial managers who advise them to invest in gold. We have outlined some reasons why you should include gold in your portfolio.
1. Protection Against Inflation
Investing in gold provides a guard against inflammation. Gold is one of the least volatile asset classes in the market. It’s an inverse correlation with other volatile asset classes, such as equity, which helps it to maintain its value even in turbulent times.
2. High Liquidity
Since there is a significant demand for gold in the market, it is a highly liquid asset. You can sell it during emergencies and make the money you need. You will not have to wait long to liquidate your gold investments in the market.
3. No specialised knowledge is required
Unlike equity or bond, investment in gold doesn’t require deep market understanding. It is simple to invest in gold. There are no tedious charts to compare all day and no trading bots you have to entrust with your money. Purchasing gold is a relatively simple process.
Different Options to Invest in Gold in India
With the development of the financial market and the digitalisation of every offering, there are various options today in India for gold investors. Let’s look at the gold investment options available for investors in India.
Gold coins and bullion can be bought as an investment besides gold jewellery and ornaments. These are the purest form of gold that can be sold back later or used for making jewellery. Gold coins are available in sizes ranging from 1 gram to 50 grams.
E-gold or Digital Gold
This is an electronic form of investing in gold. Digital gold is the same as actual gold, despite being stored in an electric form. Purchases of e-gold can be done in smaller amounts of 1 or 2 grammes. Like any other digital transaction, buying and selling gold is possible on fintech platforms.Investors need to be aware that not every platform sells digital gold. It’s important to research the market thoroughly before investing to avoid fraud.
Gold ETFs ( Exchange Traded Funds)
Gold ETF investments offer investors flexibility and liquidity without any trouble keeping the physical gold. However, having a demat and trading account is essential to purchasing gold ETFs.
Sovereign Gold Bonds (SGB)
Sovereign gold bonds are the safest form of gold investments. The Reserve Bank of India issues these bonds on behalf of the government of India. These bonds are traded on an exchange. The investor’s bank account gets 2.5% of the bond interest twice a year.
One gram of gold can be used as a starting point for an investment. To invest in sovereign gold bonds, the investor must pay the issue price in cash to an authorised broker from SEBI.
Gold futures are contracts that involve an investor, a seller, and a specific amount of gold. They agree on the price and delivery date for the gold to be delivered in the future. It benefit investors from trading gold without paying the total amount in advance.
If you consider investing in gold, this is less risky than the above options.
The tangible assets gold provides as an investment come with costs for storage and insurance. On the other hand, the ease of trading and liquidity offered by gold ETFs and digital gold comes with hazards, including market risk and expense ratio. Therefore, before investing in gold, buyers should consider their investment objectives and level of risk tolerance.