Various Options Available For Making Investment in Gold

02 Jun

Every individual builds up his portfolio considering various investment options and finally making them a part of his portfolio. But not all of us are aware, which financial asset will actually help us during the period of crisis and finally support us to overcome that situation. Inflation, currency failure, stock market crash, etc are few examples of such economic crisis.

A serious investor is very much concerned about the future uncertainties and will definitely pick gold to make investment in. Gold is very much durable and widely accepted form of financial asset as it provides best assistance during the period of crisis. Not only individuals but also nations emphasizes on hoarding gold for the period of crisis. Recently China and India, procured tons of gold as a hedge against dollar risk. Gold as an investment option can be acquired in various forms and each form has its own merit and demerit. Below mentioned are few ways of making investment in gold along with their merits and demerits.

Jewellery

Merits

1) Investment is quite easy as you just require cash to purchase it.

2) Investing early benefits you by meeting marriage expenses.

Demerits

1) Chances of theft has acquired in physical form.

2) Making charges of near about 10-35% brings down your profit margin during rate hikes.

3) People normally don’t wish to sell it off.

Inference drawn: Indians invest in gold for various reasons like, marriage, wearing purpose and finally selling it off during the period of crisis. However, people normally don’t wish to sell-off gold unless, very urgent. Owing gold in form of jewellery is our tradition and hence, a best option to invest in gold.

Gold Coins

Merits

1) Its value is equivalent to that of international gold price.

2) Highly accepted and reliable source to invest.

3) Very easy, as can be purchased from banks, local jeweller, etc.

4) Huge investment not required as available in smaller denominations also.

5) Easily stored.

6) Highly liquid.

Demerits

1) Owned in physical form so fear of theft.

2) You pay a premium of 4-10% while purchasing and same % is deduced while selling it thus, minimizing your profit.

Inference drawn: Definitely purity of coins is guaranteed by banks however, purchasing the same from local jeweller will be at your own risk. Investors wishing to be on safer side and desirous of making investment in gold can look for gold coins.

Gold bars

Merits

1) Its value is equivalent to that of international gold price.

2) Premium/discount on buy and sell is very minimal

3) Renowned and reliable source to invest in.

4) Can purchase from banks, local jeweller, etc. Hence, becomes easy to buy.

5) Highly liquid.

Demerits

1) Fear of theft as purchased in physical form.

2) May require lump sum amount during initial period as smaller denominations not available.

3) High risk of forgery.

4) Involve storage cost for large bars.

Inference drawn: If the storage and initial lump sum amount is bearable for someone, they can look upon this option as the premium/discount is minimal. Care should be taken while purchasing it. Look for genuine sources to avoid any sort of fraud.

Gold ETFs

Merits

1) Investment is easy. You just require to open a demat account.

2) No losses as per premium/discounts are concerned.

3) Ensures safety, as no physical possession required.

4) Minimum initial investment.

5) Various options available to invest like, SIP, etc.

Demerit

1) No physical possession so may face problem during the period of crisis.

2) May have liquidity problem.

3) Complicated structure.

4) Involves transaction fees and annual maintenance charges.

Inference drawn: This option is not much popular as that of physical possession. Investors with demat account are aware of it. It’s very easy to manage your gold investment through this route involving no physical burden hence, quite convenient.

Gold mining stocks

Merits

1) Indirect way to take exposure in to gold.

2) Chances of capital increment high in comparison to direct investment.

3) Safe as no physical holding required.

4) Highly liquid.

5) Low initial investment.

Demerits

1) You don’t have gold in physical form so may face problem when the gold deposit yield reduces or if the company faces any crisis.

2) In-depth research essential before investing.

3) Volatile and risky in comparison to other options.

Inference drawn: It’s considered one of the most innovative investment options but requires in-depth research before investing.

Finally to conclude, investment in gold is actually essential and it’s also a wise decision of making gold a part of your portfolio. Gold reserves are even maintained by nations to meet future economic crisis. Invest in gold as per your needs, capability, though above mentioned ways which suits you best.