Indian is among the leading consumers of gold. Indians buy gold since it is considered one of the safest investment options that have a consistent market presence. Gold should be an important part of every investor’s portfolio as it serves to mitigate the share market risks. It is one of the most trusted forms of investment in India as it helps you to generate good returns on your investment in the long run. However, the main question remains. Is it profitable to invest in gold? Let’s try to analyze.
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Investors often take into account aspects like safety, liquidity and returns while investing. This statement answers the most basic question as to why we should consider investing in gold. The gold investment allows you to get safety and liquidity. When speaking about returns, investment in gold has always fetched better returns to investors.
Let’s take a look into some of the reasons and try to understand why investing in gold is beneficial:
See Also: 10 Reasons for Investing in Gold Bullion
Traditionally investment in gold meant purchasing ornaments or gold bullion. However, with time the forms of gold investment have changed and now people also invest in gold funds and gold EFTs besides physical gold.
Here are some ways in which you can invest in gold:
Buying physical gold includes buying ornaments, gold coins and gold bars. Buying ornaments has its share of disadvantages as it overall cost involves making charges. The main benefit of investing in physical gold is that you can make a direct purchase without any paperwork. You do not need to open a Demat account as well. However, you have to submit your PAN card for purchasing gold above a prescribed limit in a year.
Investment in equity-based gold funds is made in gold bullion and companies involved in mining gold. Though you do not have to open demat account to invest in these funds, you must pay a fund management fee. The funds are directly affected by changes in the gold prices. It is also susceptible to market fluctuation and equity-based risk. Investment in such funds is best for investors who can get higher gains by taking a calculated risk.
Gold EFT refers to a type of mutual fund that invests in gold. The units of the gold exchange-traded fund are listed in the stock exchange. To invest in these funds you need a Demat account and you have to pay brokerage charges as well as the fund management charges. This type of investment is best suited for investors who have the required knowledge and skillset to trade.
A gold fund is a mutual fund or in exchange-traded fund that invests predominantly in gold bullion or gold producing companies. The main objective of this fund is to generate higher returns from gold investment in a convenient manner. Benefits of investing in gold funds are as follows:
The gold investment proved remarkable from the year 2006 onwards. If you notice the trends this year, gold has been performing consistently well from June. It took domestic prices up from Rs 33,000 levels in June for 10 grams to lifetime highs of Rs 40,000 in September.
So it is safe to say that investing in gold, in any form is profitable. However, these are certain pros and cons of these investments that will clarify which form of investment is better:
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