6 Tips For Investing In Gold And Its Benefits

Diwali, Dhanteras, Akshay Tritiya, birthdays, anniversaries, weddings – whatever be the occasion, the one gift that never fails to impress is gold. Not only is India one of the largest exporters of gold and precious gems, the domestic market for the yellow metal is also one of the largest in the world. Gold is much more than a mere adornment; it is one of India’s most favoured investment options. Even those with a little to no knowledge of the financial markets invest in gold. Let us have a look at a few tips that one must know when investing in gold.

  1. Gold Is An Investment – The first thing you must understand is that like equity or fixed deposits, gold is an investment. It is best not to buy gold for superstitious or sentimental reasons but for financial ones.
  2. Types of Gold – Before investing, it is best to learn about the different modes of investment. Gold can be bought as jewellery, coins, bars, or ETF units. Each has its own advantage but by far ETF is the best option for investors.
  3. When to Invest – Like any other investment, it is important to follow the market and to make a well considered decision about your investment timing. Gold prices fluctuate daily and it is best to buy when the price depreciates.
  4. How Much to Invest – In many developed countries, it is recommended that gold make up about 5 percent of an investor’s portfolio. Given India’s huge appetite, it is recommended that the investor allocates about 10 – 15 percent of his/her portfolio to gold.
  5. Buy Safe – When it comes to gold it is very important to be sure of the authenticity of the purchase. This is particularly true of physical gold. If you choose to invest in ETF, however, you need not worry about this.
  6. Remain Patient – Like with many other investment options, gold will take a long duration to give you a good ROI. Unlike equity, daily fluctuations are rare and almost imperceptible. Over time, however, you may expect a good return.

Apart from the fact that gold has been a favoured buy among Indians, there are some great benefits of investing in gold. Read on to know them –

  • Gold provides the diversification that your portfolio requires. The bullion is inversely correlated with the stock market. This means that when the equity market is unstable or moving down your investment in gold could mitigate some of the risk.
  • Gold hedges your stock market investments. This means that gold investments can be a safe haven during equity market crashes and big declines.
  • Gold offers great liquidity. This means that your assets in gold can be sold, pawned, pledged, or used as collateral for loans very easily. For gold loans, you can get in touch with a reputed gold loan company.
  • In a country like India, the demand for gold never goes down. Since time immemorial gold jewellery and coins have been used by Indians. This makes it easy to buy and sell gold.
  • With gold ETFs coming into the Indian market, it has become easier to invest in SIPs or make small investments.
  • Gold ETFs can be stored in digital format just like stocks, hence minimize the risk of being stolen.

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