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Gold Investment In India - How To Invest, Options And Benefits Research Team | Posted On Friday, October 12,2018, 05:53 PM

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Gold Investment In India - How To Invest, Options And Benefits



In India, gold is a much sought after item that has consistent value and presence in the market. Investing in gold is not limited to buying ornaments alone. As gold is a liquid asset and can easily be converted to cash, it widens the avenues for a safe investment. The options to invest in gold are varied. One can invest through Gold ETFs, Gold Mutual Funds and e-gold too. Each of these investment options holds unique benefits. Investing in physical gold requires no paperwork and is instrumental in preserving wealth in the long term.

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Gold Investment In India – How To Invest, Options And Benefits:

Why Should You Invest In Gold?

Gold is one of the most popular forms of investment. Compared to other precious metals, investment in gold ensures safe returns and offers liquidity. It is unwise to invest only in gold, so invest a small portion in gold and diversify to avoid risk and earn returns. These are a few benefits of investing in gold:

  • Investing in gold is a good option as it is a hedge against inflation. In the past few years, the price of gold is constantly rising. Investors tend to buy gold when the other investment avenues like stocks are falling. Factors like this help to boost gold prices and over a period of time, the returns you get by investing in gold, are in line with the rate of inflation.
  • Gold investments can help investors avoid financial disasters. The price of gold is negatively correlated to the equity market. When the equity markets crash, gold generally rises. Considering gold as an investment will help sustain the losses that you might incur on stocks and bonds.
  • Gold is a highly liquid asset and can be easily converted into cash. It involves no paperwork and can be passed on from generation to generation.
  • Gold is considered a commonly acceptable asset all over the world.

How To Invest In Gold?

Traditionally, investment in gold was done through ornaments. But, with the passage of time, the investment process has changed and more advanced forms of investment have emerged like gold EFTs (exchange traded funds) and gold funds. These options provide security and are convenient forms of investing in gold. Investing in Gold funds means investing in companies engaged in mining gold and does not include buying or selling of physical gold.

Discussed below are some ways of investing in gold.

Buying Physical Gold: buying physical gold means investing in jewelry, gold coins and bars. Buying jewelry involves making charges, but there are no making charges in gold coins and bars. The benefit of investing in physical gold is that you can directly buy them, without having to worry on opening an account. No paperwork or Demat account is needed to invest in physical gold. However, you may be robbed and prices fluctuate depending on the market rate.

Gold EFTs: It is a type of mutual fund which invests in gold and units of the mutual fund scheme are listed on the stock exchange.  To invest in exchange traded funds (etfs), you must open a demat account. It involves no paperwork; however you must pay the brokerage fees and the fund management charges. Gold EFTs are best suited to investors, who have the requisite skills and time to trade.

Equity Based Gold Funds: this is a type of investment where money is invested in companies related to mining and extracting gold. The investor does not need a demat account, but has to pay a minimum fee for managing the gold fund. These funds are directly affected by market fluctuations and are susceptible to gold price based risk and equity based risk.

What Are Gold Funds?

Gold funds are a type of investment where an individual can invest in gold bullion or stocks of gold mining companies. Gold funds also include other metals in their investment options. Investing in these funds means a trade is set, where the investor can buy or sell stocks, thus maximizing returns. However, gold funds are dependent on market fluctuations.

Gold funds are a valuable tool for investors who wish to safeguard their portfolio against geo-political risks and inflation. Investors shield their portfolio by buying these mutual funds and selling them at a higher price. These are good investment tools that offer both security and shield investments, irrespective of geographical boundaries.

Gold Funds vs Mutual Funds:

Investing in both gold und and mutual funds can be really profitable. But, these contain certain merits and demerits when they are put against each other. Let’s discuss which investment is better:

  • Returns: gold is liquid in nature and can be sold at current market rates. Mutual funds are options where investors pool money from the market to invest in different market instruments to multiply money.
  • Management: gold doesn’t require management, whereas mutual funds are professionally managed by experts to reduce risk and maximize returns.
  • Risk: possessing physical gold is risky and prone to theft or burglary. Investing in mutual funds can be managed safely by an expert.
  • Cost of Investment: buying physical gold depends on the market rate. Mutual funds are affordable and one can start with a small investment.

Investing in gold offers lesser returns as compared to equity mutual funds. Investing in gold is secure and comes with a lower market risk, compared to mutual funds. Gold can be seen as a diversifying investment. It is a safe investment and will keep your investments steady, as gold is not related to stocks and bonds.

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