Investment In Gold – Things You Should Know Before Investing

Gold has been a repository in India since years. Studies shows, that over 16000 tons of gold is acquired by Indian household in forms of jewelry. Besides being an aesthetic value it is used as gifts in marriages and other functions.

Gold What you should know before buying gold in India golden eggs in a nest

Why To Invest In Gold?

Gold gives the highest return on investment (ROI) at the time of inflation because when inflation increases 10% gold increase by 30%. Thus, this is the most recommended and suitable type of investment in today’s scenario. The demand of the gold is much higher than that of supply so there would be probable increase in its price and is totally free from credit risk as well. With an average return of 7% gold has proved its protection against inflation which is expected to yield 6-9% in near future; hence, Global Economic Crisis of 2008 is the best example of the gold investment in the ETF.

What are the ways to invest in Gold ?

  • Gold as jewelry in ancient India is worn extensively whether for fashion or for prestige but its loss of value due to impurity, theft, making charges cannot be ignored.
  • Gold bars are kingly methods of storing gold which can be bought in 100 gm, 200 gm and so on as it provides ease of purchase from authorized banks and shops with insurance facility as well.
  • Gold coins being the easiest medium to store forces ease of availability in banks, post offices, jewelry stores etc. which provides various types and sizes of coins ranging from 1/20th of an ounce to 1 ounce i.e. 1gm, 2gm, 5gm and so on. When compared to gold bars, gold coins are easily affordable by retail merchandiser because buying the same from banks may be costly due to mark up tax.
  •  An opportunity of owning gold certificate is provided to an investor depositing gold in banks. These schemes provides certificates or passbooks as an evidence of holding gold at an interest of 3-4% p.a. depending on the number of years it is deposited for.
  • The safest way to invest in gold is none other than Exchange Traded Fund which is a mutual fund that invests your money collected from sale of shares in gold. These holdings are in units of grams which is projected on the stock exchange on the price prevailing in the market. Trade in ETF can be easily done through Internet.
  • Acquiring gold in paper form does not provides with much advantages as ETF because having it in a physical form may be subjected to lost or devaluation during transportation or over a long time span. Thus, investing in smaller strata is the perfect way of earning returns for small investors.
  • Gold mutual fund is a specialized fund of investment in gold than ETF. Here the investors invest directly in gold companies rather than gold metal. It is just similar to any Public ltd. Company investing its shares to general public. Hence, the advantage of gaining changing value of gold may not be adopted appropriately.

For instance, let us see what opportunities a person has for investing Rs. 1 lakh in gold for his daughter’s marriage.

  • He can buy jewelry either from a general retailer or from a branded showroom like Tanishq.
  • He can buy golden bars having the highest and purest form of gold.
  • He may not purchase gold coins due to loss of storage and cost of insurance with no interest.
  • He may likely to have the ownership of gold certificates with free storage and insurance facility by investing in just 200 gms or 500 gms respectively.
  • If he has a trading account in any brokerage firm like Sharekhan, Kotak etc. then ETF is the best option to avail.

Conclusively, apart from equity and debt gold stands as the glossy investment in near future due to its highest return (ROI) whether in Inflation or in day to day life. ETF yielding 26% return p.a. is considered best but Nifty 4% isn’t a bad option but the combination of both is advisable. So, are you planning to wear or to invest in glossy gold?

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