Connect with us

Blog on Finance : Here's Everything You Need to Know.

Blog on Finance : Here's Everything You Need to Know.

HOW TO INVEST IN GOLD THE RIGHT WAY

Gold Invest

General

HOW TO INVEST IN GOLD THE RIGHT WAY

HOW TO INVEST IN GOLD THE RIGHT WAY

Gold, an expensive metal commonly used in the form of jewelry. It is not only used as jewelry but also works as a great tool to help in financial emergencies. It is a great form of investment. It has High liquidity and inflation-beating capacity, along with great charm, prestige, and so on, which give it strong selling points. Many times we witness a fall in gold prices in the market but they don’t last for long, and always make a strong comeback. Therefore, Buying gold has traditionally been used as a financial support system over the years now.

Why Should We Invest in Gold?

  1. Most risk-averse Investors always look for three criteria before making an investment in any field. These are
  • Safety
  • Liquidity
  • Returns

Gold meets the first two criteria without any errors and is not so poor at the third one either.

2. Gold investment is worthwhile as it is an inflation-beating investment. The return on gold investment will be in line with the rate of inflation.

3. There is an inverse relation of gold with equity investments. For instance, if the equity markets start going down, gold prices will go up. In your investment portfolio, gold as an investment option will be a buffer to the overall volatility of your portfolio.

Related : Which one to choose: Gold Loan or Personal Loan?

How to Invest in Gold?

Now The ‘golden question’- how does one invest in gold? And how to get cash for gold.

There are two ways of owning gold – paper and physical. The physical form of gold includes jewelry, coins, and gold bars. Whereas paper gold includes gold exchange-traded funds (ETFs) and sovereign gold bonds (SGBs). There are also gold mutual funds (fund of funds) which further invest in gold ETFs. One other form is gold MFs (fund of funds) which invest in the shares of international gold mining companies.

PHYSICAL GOLD

For buying or selling physical gold, one may reach out to the gold jewellery buyer in delhi or neighborhood jewelers near them. Many jewelers have started an online business and are placing orders on their websites too. Further, there are many e-commerce websites such as Amazon India, Paytm, and Snapdeal where one can buy gold online such as coins and can get them delivered at home. Physical gold includes the following-

  1. Jewelry

In India, it is certainly cherished possessing and buying gold for jewelry purposes. Though this could also be considered as an investment owning gold in the form of jewelry has its own concerns. This includes safety, high costs, outdated designs, making charges which could prove to be a costly affair. As making charges on gold jewelry, can range between 6 percent and 14 percent of the cost of gold and may go as high as 25 percent in case of special designs. These are irrecoverable during the cash for gold.

2. Gold coins and bars

Gold coins and bars are a better form of investment than jewelry. It can be bought from jewelers, banks, non-banking finance companies, and now even e-commerce websites. The Indian Gold Coin and Bar are of 24 karat purity and 999 fineness carrying advanced anti-counterfeit features and tamper-proof packaging. These are hallmarked as per the BIS standards. When you sell gold near me in the form of coins or bars, there is no reduction of outdated designs or making changes.

3. Gold savings schemes

The Gold or jewelry savings schemes come in two forms. The first one allows you to deposit a fixed amount every month for the chosen tenure. When the term ends, you can buy gold (from the same jeweler) at a value that is equivalent to the total money deposited, including a bonus amount. In second, the jeweler adds a month’s installment at the end of the tenure as a cash incentive. He can even offer a gift item.

PAPER GOLD

  1. Gold exchange-traded funds (ETF)

An alternate way of owning paper gold. It is a more cost-effective manner. In this, the investments (buying and selling) happens on a stock exchange (NSE or BSE) with gold as the underlying asset. The advantages include- the high initial buying and even selling charges that go into owning jewelry, bars, or coins as these give an extra edge to the low-cost gold ETF. Also, there is Transparency in pricing. The price at which it is bought is always the closest to the actual price of gold and therefore the benchmark is the physical gold price.

2. Sovereign Gold Bonds (SGB)

Another way of owning paper gold is by Sovereign Gold Bond.  They are issued by the government. The availability for this is not an ‘on-tap basis’. Instead, the government intermittently opens a window for the fresh sale of SGBs to investors every 2-3 months and this window remains open for about a week. For investors looking to purchase SGBs anytime in-between, can only buy earlier issues (at market value) which are listed in the secondary market.

Conclusion-

Always Get clarity as to why you need to invest in gold. If it is for marriage purpose or for pure investment. If it is For investments only, one should not have more than 10 percent of the total portfolio in gold. Therefore, try to Choose between Gold ETFs or SGBs depending on how comfortable you are managing investments online. This will also keep the worries of purity and security aside. If it is for both- marriage and investment, jewelry, coins, and bars work best.

Continue Reading
You may also like...

Aaron Smith is a content marketing executive at Blogonfinance. He frequently blogs for the Blogonfinance business blog and Forbes. Connect with him on Twitter @aaronsmith20111

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

More in General