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 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:
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.
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.
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:
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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