In his webinar on Investing in Gold, Mr Krishna Hegde, CFA, of CFA Society India, discusses the benefits of investing in gold. Here are some of the important points he makes:
What is the function of gold in a portfolio? Gold is important for Portfolio diversification. It has different characteristics as compared to other precious metals like silver, copper, or platinum. These differences are with regard to its volatility, returns, external market conditions, and the like. So how much of your portfolio should you allocate to gold? Mr Hegde recommends a 5 to 20% allocation to get a good risk reward from a portfolio construction standpoint. For a common investor, it makes sense to allocate 10 to 15% in gold at all times.
Gold’s global trade makes it a hedge against inflation and currency depreciation. In normal times, it maintains pace with inflation and protects purchasing power of the capital. During bad times, gold acts as a wonderful hedge in the portfolio. Gold has near-universal confidence and is used as a proxy currency which is an accessible retail asset. That’s why it is seen as a Safe Haven Asset in a crisis and during periods of high volatility. These periods could include a pandemic, financial crisis, war, or socio-economic disturbance in the country. When there is a lack of faith in the global currency in a crisis, gold is seen as a more reliable investment and a good store of value in situations of high volatility, the demand for gold increases because gold is a high-value asset and is portable and liquefiable.
Gold has delivered significant positive real returns (subtraction inflation) and did well during periods of both low and high inflation and can preserve it’s purchasing power for a longer duration of time. The perception of gold has changed recently as prices have gone due to a function of demand and supply. Gold prices in May 2019 were Rs. 32470/10gm and in July 2020 they jumped to above Rs. 51000/10gm. Today, with the low interest rates, it doesn’t make much sense to put your money in banks, especially with prospects of inflation. So, experts recommend investing in gold and increasing your holdings over time, which serves as a long-term investment.
This impressive increase of 40% makes it the best performing asset class. So, is it a good time to invest in gold? Yes, because astute investors like Seth Klarman and Ray Dalio are predicting a further increase in the prices of gold and are vouching for it as a significant asset.
Most options to buy gold online involve significant expense and risk, and are not accessible for most women in India. Also, there are some restrictions on buying gold in retail stores, resulting in a rise in demand for digital gold.
This increase in demand for online and digital gold, apart from gold bars and gold coins, may continue for another 1 to 2 years. So, as an Indian woman, where can you buy gold online in small amounts, if you don’t have a lot of money to spare?
One of the best ways to invest in gold is Digital Gold. You own this gold 100% and only you access/sell it via a mobile app such as indiagold – India’s only app where you can buy and sell 24 karat gold online with BIS Hallmark certification any time for as low as ₹5.
When you buy Digital Gold worth ₹5, an equivalent amount of physical 24K gold is deposited in your name in a secure vault maintained by Augmont Gold – India’s leading refinery and manufacturer of gold – on the customer’s behalf.
This 24 karat investment-grade gold can be purchased through UPI or the user’s bank account, it also comes with the ease of making a transaction from anywhere. You can use your gold balance to buy 18/22 karat gold coins and gold jewellery from the indiagold app any time.
Original article was published here Sheroes