Should you consider investing in gold? Take a look to learn more about investing in gold.
Gold is a good store of value. A store of value is an asset that maintains its value, rather than its depreciation. If you look at how the price of gold has changed over the past 20 years, you will see that it has been constantly increasing. From $4,990 per 10g in 2002, it is now priced at Rs 52,690. This translates to an overall increase of about 955%. The annual growth rate is around 12.5%.
Gold Price Reference: https://goldprice.org/gold-price-india.html
Now, the difference between gold and other investment assets is the absolute stability it provides. Let’s understand this with an example.
If you have invested in stocks, you have chosen a company, for example Reliance, and you have invested a large amount of your money. Reliance is a strong company at the moment. It has strong fundamentals, a healthy growth rate, and historical returns.
Since historical times, gold has always been a precious metal. It is not affected by the fluctuations and fluctuations that plague the global financial markets.
This is why it is considered a much better value store than cash. If you keep your money in gold, you can rest assured that it will not be affected by exchange rate changes or other deflationary situations.
How to invest in gold?
Here are the different ways to invest gold in India.
1. Physical gold
Physical gold refers to gold that you buy from jewelry stores. It includes all kinds of gold jewellery, in addition to gold coins and bullion.
Now, we all know that gold jewelry is beautiful. But if you want to buy them for investment purpose only, gold bars or coins are the best option. This is because for gold jewelry, you also have to pay a fee to the craftsman or goldsmith for their efforts. A making fee is added above and beyond the actual gold metal price. If you resell it in the future, you won’t get that amount again. However, there are some issues with the storage and safety of physical gold. Because it is a prominent item and attracts a lot of unwanted attention.
2. Digital gold
Digital gold is ideal for investment purposes. Here, you basically buy it online, and it gets deposited into your account. But you can’t touch it or see it. You just know it’s there. This option is highly liquid and can be converted into cash at any time. You can buy digital gold from several apps and websites. However, digital gold is not regulated in India and, therefore, carries an additional element of risk.
3. Gold investment funds
Gold mutual funds are the same as regular mutual funds – the only difference is that they invest exclusively in gold companies. This is an indirect method, you are not buying gold directly, you are investing in shares of gold mining companies.
Similar, but still different, is the option to invest in gold exchange-traded funds or ETFs. Here, too, do not buy gold directly. But instead of investing in stocks of gold mining companies, you invest in a collective gold vault. Your money buys a share of the total gold.
4. Gold Bonds
These sovereign gold bonds are coordinated and issued by the Reserve Bank of India to retail investors. Here, too, do not buy gold directly. Instead, each bond is denominated in gold and will earn you fixed interest each year.
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What should I know before investing in gold?
Gold by itself is not a very profitable investment. If you compare it to other investment assets, the growth rate is much lower. The advantage of gold lies in its stability, and therefore it can be used as a means to reduce risk.
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In times of major market fluctuations or recessions, the value of financial assets drops dramatically. At times like these, gold can reclaim the value of your portfolio and stop its fall. It is ideal to hold about 10-20% of your portfolio in gold, as a hedge against economic fluctuations.
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