Investing in Gold

Apart from Fixed Deposits, Gold and Real Estate have been the other favourite avenues for investors in India. Gold particularly has been very close to the heart of Indian families, generation after generation.

Gold acts as a very good investment in times of high inflation as it is a natural hedge to inflation. Also, in times of uncertainties in economies and currency values, investors flock to gold as they consider it the only asset to have real value. There are a number of options through which you can invest in Gold:

 

Jewellery

This is the most popular form of investments by Indian households. Purchase of Jewellery by the women of the house on festive and other occasions acts like an unintended SIP wherein you invest at regular intervals. 

Pros: 

  • Easy to purchase from the next door jeweller.

Cons: 

  • Issues with respect to purity of gold can crop up.
  • Regular use of jewellery results in wear and tear and reduction in the weight of the gold.
  • On sale of the jewellery items, making charges are deducted resulting in lower gains for the investor.
  • Storage of physical jewellery in a safe place is a problem.

Do you have Gold in your Portfolio?

 

Gold Bars and Coins

Gold bars and coins can be purchased from your local jeweller or from a bank. 

Pros: 

  • You can save on the making charges incurred for purchase of jewellery.
  • Gold can be bought in quantities as small as 1 gm.
  • Gold Bars…score over jewellery in terms of purity.
Cons:
  • Safe Storage is again a problem with Gold bars and coins.
  • They are sold at a price higher than the prevailing market price increasing your cost price.
  • Banks do not purchase back gold bars and coins. So you have no option but to sell it to the local jeweller which is generally at a small discount to the market price. 

 

Gold ETFs

This is also known as paper gold. As the name suggest, Gold Electronic Traded Funds(ETFs) can be traded on the Stock exchange. Just like you purchase a share, quantities of gold can be purchased and held in your demat account.

Pros: 

  • No Storage worries as gold purchased is directly credited to your demat account. No Purity Issues as well.
  • Gold can be purchased and sold at real time at the prevailing market prices.
  • Gold can be bought in quantities as small as 1 gm.

Cons: 

  • You need to have a broking and demat account to buy a Gold ETF. Brokerage costs need to be incurred on both purchase and sale of Gold ETF units.

 

Hybrid Funds

Of late a number of Mutual Funds have launched Schemes which invest in a mix of Debt and Gold or Debt, Equity and Gold. Investing in such schemes enables you to get some exposure to the yellow metal.

Pros: 

  • Like all other Mutual Fund Investments, these funds can be a part of your portfolio at no brokerage cost and without a demat/broking account.
  • No Storage costs and no Purity Issues. 
 Cons:
  • Your exposure to gold depends on the call taken by the Fund manager of the scheme.You cannot take exposure in defined quantities.
  • Forced to stay invested in debt/equities as a part of the Hybrid Scheme.
 In the past few years, Gold ETFs have become the most popular form of investment in gold because of their obvious advantages. However, physical jewellery still enjoys the largest share of Gold sales India.

Leave a comment



CONTACT US



Wealth Cafe Financial Advisors Pvt Ltd is a AMFI registered ARN holder with ARN -78274.

Wealth Cafe Financial Advisors Pvt Ltd is a SEBI registered Authorised Person (sub broker) of Motilal Oswal Financial Services Ltd with NSE Regn AP0297087003 and BSE Regn AP0104460164562.

 

Copyright 2010-20 Wealth Café ©  All Rights Reserved