Gold Investment - Safest & Oldest Investment of India
In India, gold is considered as a valuable asset for society in terms of jewelry consumption as well as wealth accumulation by large number of low and middle class people. Throughout history, gold has been seen as valuable commodity. Therefore, gold is considered as a tool for financial planning.
People often ask me why to invest in gold rather than other investment strategies. I would give you undoubted answer :
- It has maintain its value over time. It has been proven hedge against inflation.
- Gold investment has minimum risk. Inflation and deflation does not have much impact on gold.
- It is simple and easy to liquidate. It can be exchanged for cash.
- It is key to diversified portfolio. Gold has historically negative correlation with stock.
1. JEWELRY :
It is the oldest way of investing in gold. You can buy it from jewelry shop. If you want self satisfaction than it is good way of investment. But I would never recommend anyone to invest in jewelry. Because it includes making charge and other accessories charge (kundan, moti etc) which has no resell value. Secondary, you have to kept in at home so its risky or keep it in bank locker where you have pay locker fee.
2. COIN OR BAR :
It is one of the good option to invest in gold coins or bar as it has full resell value. You can buy it from jewelry shop or bank. Here you have self satisfaction of being gold with you. But this have same issue of risk & locker. But still i would recommend that it is very good way to invest in gold since there is no additional charges. I personally buy gold coins every year for future safety. It is highly liquid means easily exchange for cash.
It is the oldest way of investing in gold. You can buy it from jewelry shop. If you want self satisfaction than it is good way of investment. But I would never recommend anyone to invest in jewelry. Because it includes making charge and other accessories charge (kundan, moti etc) which has no resell value. Secondary, you have to kept in at home so its risky or keep it in bank locker where you have pay locker fee.
2. COIN OR BAR :
It is one of the good option to invest in gold coins or bar as it has full resell value. You can buy it from jewelry shop or bank. Here you have self satisfaction of being gold with you. But this have same issue of risk & locker. But still i would recommend that it is very good way to invest in gold since there is no additional charges. I personally buy gold coins every year for future safety. It is highly liquid means easily exchange for cash.
3. SOVEREIGN GOVERNMENT BONDS (SGB) :
These bonds are issued by government under which investor has to pay issue price of minimum 1 gm of gold to maximum 4 kg of gold, where a maturity period is 8 years with 5 years lock-in period. These bonds are purely for investment purpose and not for consumption use as you get your amount as per the price of gold on maturity and not the physical gold. You can apply for it through online portal or post office, recognized banks or authorised stock brokers. Liquidity might be little hard as you wont get buyer of your bond easily on stock market after 5 year lock-in period. Still, three best reason for investing in these is
These bonds are issued by government under which investor has to pay issue price of minimum 1 gm of gold to maximum 4 kg of gold, where a maturity period is 8 years with 5 years lock-in period. These bonds are purely for investment purpose and not for consumption use as you get your amount as per the price of gold on maturity and not the physical gold. You can apply for it through online portal or post office, recognized banks or authorised stock brokers. Liquidity might be little hard as you wont get buyer of your bond easily on stock market after 5 year lock-in period. Still, three best reason for investing in these is
- It provide fixed interest of 2.5% p.a. as compensation. No other investment in gold will provide you interest.
- Capital gain arising at the time of redemption will be completely tax free.
- Completely secure as issued by government.
4. GOLD MUTUAL FUND :
They are defines as a portfolio of shares that are pooled from multiple investor. They do not invest in physical gold but instead make investment in gold mining companies. Here you have advantage of SIP and its not necessary to have demat account. The expense ratio is high. The minimum amount to start SIP is as low as 1000rs. Its liquidity is low as compared to gold ETFs. I would never recommend anyone to invest in gold mutual funds.
They are defines as a portfolio of shares that are pooled from multiple investor. They do not invest in physical gold but instead make investment in gold mining companies. Here you have advantage of SIP and its not necessary to have demat account. The expense ratio is high. The minimum amount to start SIP is as low as 1000rs. Its liquidity is low as compared to gold ETFs. I would never recommend anyone to invest in gold mutual funds.
5. GOLD EXCHANGE TRADED FUNDS (GOLD ETFs) :
It is a commodity ETFs where principle asset is only gold. In simple words, it is kind of storing gold in paper form or dematerialized form. They are very much similar to equity. They are listed on stock exchange from there you can buy or sell it. The minimum value for trading is value of 1 gm of gold. Here you will require a demat account to hold it. The expense ratio is low (0.5% to 1%) as compared to gold mutual fund. There is no SIP in this and you will never get physical gold even on redeeming your gold ETFs. They are highly liquid because you can easily sell them on stock exchange whenever you want. Capital gain tax is applicable on gold ETFs sold at profit. It has advantage of risk free and hassle free storing. Investing in gold ETFs is better option than gold mutual fund.
It is a commodity ETFs where principle asset is only gold. In simple words, it is kind of storing gold in paper form or dematerialized form. They are very much similar to equity. They are listed on stock exchange from there you can buy or sell it. The minimum value for trading is value of 1 gm of gold. Here you will require a demat account to hold it. The expense ratio is low (0.5% to 1%) as compared to gold mutual fund. There is no SIP in this and you will never get physical gold even on redeeming your gold ETFs. They are highly liquid because you can easily sell them on stock exchange whenever you want. Capital gain tax is applicable on gold ETFs sold at profit. It has advantage of risk free and hassle free storing. Investing in gold ETFs is better option than gold mutual fund.
6. DIGITAL GOLD :
It is simple, convenient and secure way of investing in 24K physical gold online. It is launched in 2018 where some commerce platform (like Paytm, PhonePe, Google Pay, etc) enables people to buy, store or sell pure gold instantly. There is maturity period of 5 - 7 years on different platform. It is one of the trending investment in gold. Some good reason for investing in digital gold are
- Minimum amount to invest is 1 rupee (on Paytm).
- You can get physical gold delivered at your home on your request or sell it for cash.
- Risk free and hassle free to storage.
I have chosen this topic because I consider that gold investment is much needed investment for every individual as gold has never degraded its value and it is helpful in your bad time. It will help in future whether it is retirement or child marriage. It will never give negative return in long term investment.
These are my views and suggestions. Please do your research and than invest.
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