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Posted by Shyam as Investment Ideas
Investment in gold has always been considered as a save heaven as far as protecting your investments are considered. Since the last 8 years gold prices has trebled and has been rising steadily and now it has peaked at $1100 per ounce and about Rs18,000 per 10 gms of gold in Indian bullion market. During the tough recession period, gold was the only asset class which has given +ve interest on investment. It is considered as a hedge against inflation and dollar price movement.
The money saved can be invested by buying Shares, property, gold and other immovable assets. Perhaps the best option would be investing in gold. Gold acts as a buffer that protects from the fluctuating share prices and real estate prices. The price of gold has been increasing over the past couple of years. The growth rate in the past 15-20 years has been substantial. Gold has yielded an average return of over 7%. Gold has been acting as a hedge against inflation.
While there is always a risk that the currency rate may fall, Gold is said to always retain its true value. Thus Gold proves to be probably the best investment option. There are various ways of investing in gold. It can either be purchased in its physical form like bars, jewellery, biscuits or one can also think of investing in the dematerialized form. Though investing in gold is a good option, main disadvantage in buying ornaments is that the resale value does not always yield profit. Hence one should consider investing in gold in the form of Gold Exchange Traded Funds.
Gold ETFs are basically open ended mutual funds which can be traded. The Gold ETFs are listed on the stock exchange and can be traded like shares and stocks on a real-time basis. The lowest unit that can be invested is equivalent to the market value of one gram of gold. Gold ETFs can be purchased through a stock broker by opening a Demat account and a Share trading account.
The brokerage, service tax, securities transaction tax, etc, on the purchase and sale of Gold ETFs is less and also the process of buying and selling Gold ETFs is convenient. Some of the advantages which gold ETFs provide include diversification of portfolio, liquidity, safety, security and lower cost of transaction. Gold ETFs come under mutual funds and they are taxed per the debt mutual fund taxation rules.
The main advantage of investing in gold in the form of Gold ETFs compared to its physical form is that the for buying an ornament you would require good amount of money whereas in the case of Gold ETFs you can accumulate gold at a slow rate, investing as little as one gram at a time. Also with the Gold ETFs, there is no worry about secured storage, purity and insurance against theft. Thus investing in gold can be easy and profitable at the same time. In the longer run gold will definitely prove as a worthy investment. So investors can allocate certain part of their funds into the gold asset class.
If you have any queries on gold as a investment avenue, do drop a comment and I shall try to answer with the best of my knowledge.
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