How to Automate Savings with Digital Gold Investments
What is Digital Gold?
- Definition and explanation of digital gold
Besides its role as a symbol of wealth and prosperity and a culturally important metal, gold has also proven to be a fantastic financial investment due to its track record of solid returns on investments across medium to long time frames. Since the world is moving digital, investments, too, are going in the same direction. Now the investors can enjoy the value appreciation, low volatility and low risk of physical gold by investing in its digital alternative. In essence, Digital gold is a financial instrument backed by actual gold, where the investor does not need to hold the gold in its physical form to enjoy the returns, and other financial characteristics.
- Differences between physical gold and digital gold
From an investment point of view, the difference between digital gold and physical gold is miniscule, as both produce similar returns, carry almost the same risks. However, the only major differentiator being the physical nature. In case an investor holds physical gold, they can utilize the same to make ornaments or jewellery. But with digital gold, it can only be used as a financial asset.
- How digital gold works (e.g., through digital platforms, tokens, or online investment services)
Digital gold is a type of financial asset, the same can be purchased digitally on a financial asset broking platform, or one can simply visit a bank or certified dealer who can issue gold bonds in exchange for the money investment consideration.
Benefits of Digital Gold Investment
For investors wondering - Is digital gold a good investment, there are plenty of benefits that come with investing in digital gold. Some of the benefits are as follows:
- Hedging against inflation and market volatility
Financial securities are highly volatile in nature, and pose other risks too. Gold in both physical but especially digital form can be a great investment which not only produces solid returns but can act as a counterweight to lower the market volatility risk tied with investing in other financial products like stocks. Also, since gold has risen consistently over the last couple of decades, it can also act as a great hedge against the inflation i.e. protect the money value against the inflation effect
- Flexibility and accessibility of digital gold
One aspect where digital gold fares better than physical gold is the flexibility and convenience it offers. With digital gold, the investor does not need to personally find a buyer in the secondary market to sell their asset, they can do so simply using online platforms like digital gold app, without going through the hassle.
- Low transaction costs compared to physical gold
With physical gold, there are several costs associated with investment, like making charges, etc. These charges are not recovered at the time of liquidation. This essentially increases the cost of capital. This is not the case with digital gold, where the buyer only pays for the gold value, and marginal transaction related fees. This is a massive upside if the transaction or investment volumes and amount is high, as costs like making charges which are even charged on gold coins can add up to a substantial amount.
- Fractional ownership and small investment thresholds
One great factor to consider while investing in digital gold is that there is no minimum investment threshold. Unlike physical gold where the investor has to buy gold as per the weight of ornament/jewellery/bullion available, restricting the gold purchase with a smaller investment budget. With digital gold investment, an investor can invest as low of an amount as they wish. A fraction of weight equivalent to the amount invested will be allotted to the investor, making gold investment more accessible to investors with all investment sizes making it one of the best way to invest in gold in India.
Why Automate Your Savings?
- The psychology behind automated saving: convenience and consistency.
Automating savings is of the utmost importance, should an individual decide to have an active investment plan. Automating savings helps the investor to consistently invest in the investment venues that are aligned with one’s investment goals, which essentially helps in increasing the investments and returns generated through these investments exponentially. Also, automated saving plans offer high convenience, as the investor does not have to actively keep a track and invest manually. A digital gold investment platform can help invest in digital gold assets conveniently.
- The challenge of saving manually and the benefits of automation
Making manual investment can be a tedious task, as it requires both consistency from the investor and an effort to remember the date of investment, and efforts of making the payments towards investment manually. This is where the automated savings plans outshine the conventional methods, as it eliminates the need to make the payments manually, the investor can simply set up automated payments towards their monthly or periodic investments, and the amount gets deducted automatically, essentially increasing the investment pool without having the need to make any manual efforts.
- How automation reduces the temptation to spend and improves long-term financial discipline
Automation of investments helps implement and maintain financial discipline, essentially enabling the investors to consistently invest towards their financial goals. Having a fixed commitment in the form of automated investments can also help control the unnecessary spending of the investor thus helping build long term financial discipline and wealth.
## Common Mistakes to Avoid When Automating Savings with Digital Gold
- Overestimating returns and investment timelines
It is necessary to have realistic expectations. Even though an investor would love to have exponential returns for the risks undertaken, however in reality the returns are directly proportional to the portfolio risk. Hence, having the right expectations is really important while investing in any financial security.
- Neglecting fees and hidden charges that can affect savings growth
Irrespective of the investment that one is making, one would have to bear the cost of the investment in form of fee or charges. For physical gold, it can be in the form of making charges, GST, etc. however for digital gold, the charges pertaining to investment can be on the lines of platform fee, processing charges, etc. It is important to take these charges into consideration while making an investment, as failing to do so may derail the investment plan and expected returns.
- Choosing platforms without proper regulatory oversight or security measures
It is very common for the unaware to fall prey to unfortunate scams. Hence, it becomes absolutely essential for the investors to ensure that they’re investing in their assets using a trusted platform which is compliant with all rules and regulations out forth by the regulatory bodies, to protect oneself in case of a mishap. What makes a best platform to buy digital gold in India is not only the convenience it offers, but also its compliance and the peace of mind it can give to the investors. Hence, choose the platform wisely!
Tracking and Adjusting Your Automated Savings Plan
- Monitor the growth of your digital gold investment
Investing without tracking the performance of your investments can be counterproductive. The reason being, that keeping a track of the investments can help the investor take measures to enhance returns and minimize profits. In times of falling markets, tracking investments can help take corrective measures to minimize losses. It can also help in leveraging market opportunities with a goal to maximize returns. Monitoring investments can also help minimize risks of the overall portfolio. Monitoring investments is essential but it becomes all the more essential in the case of automated savings plans, since there is minimal human intervention on an ongoing basis.
- Adjusting the amount or frequency of automated contributions
An investor's investment goals can change with time and market conditions. Hence, although automated investments are great to build long term wealth, having the flexibility to make amendments in the frequency and the amount of investments to align with your investment goals is really beneficial. By adjusting the amount and frequency of automated contribution to the investments, the investor can essentially adjust the risk, and also sync their investment with their investment capability. I.e. higher investments in periods of high income, and vice versa.
- Rebalancing your overall portfolio to align with your financial goals
Portfolio rebalancing is the crux of smart investment management. Financial products are volatile investments, and one investment may suit a particular time period, but may not be suitable for another. Hence, it becomes really important to actively check and rebalance the positions whenever necessary. This helps the investors normalize their risk, and maximise their portfolio returns. In case one has an automated savings plan in digital gold, they can rebalance their digital gold investment in India by simply amending the investment amount or selling their existing investments to bring the overall investments to a reasonable level.
Risks and Considerations
- Market risks specific to gold investments
Gold, like any other financial asset, is prone to change in its price level. The gold rate changes constantly to accommodate for fluctuation in its demand and supply. This price fluctuation has an impact on your existing gold investments, and your future investments too, as it dictates the total value of your investments at any given time. The same holds true for digital gold investments too. Hence, it is important for the investor to be aware of the market risk associated with the investments.
- The volatility of digital platforms and technological risks
Although digital platforms enable the investors to make their investment decisions efficiently and take an investment journey digitally, there are underlying risks that one should be aware of. Hence, the investors should be mindful while investing using such platforms as it can have an impact on the overall risk of the portfolio. The best gold investment app not only offers the convenience but also the security and compliance, which can help with the investors peace of mind.
- Regulatory and security concerns with digital gold
More often than not, the investors fall prey to digital scams. These scams leverage the unawareness of the investor, or make use of some attractive offerings. Hence it is important to ensure that the platform offering digital gold investment services are fully compliant with the local rules and regulations.
Conclusion
Digital gold is a type of financial instrument where the asset is backed by actual gold and allows the investors to get all the advantages of gold like price appreciation, lower volatility, low risk and without owning the physical asset in the form of gold metal. Digital gold can only be utilized as a financial asset, as it cannot be utilized as a physical ornament or jewellery, unlike physical gold.Therefore, with a much more accessible purchase process and more flexibility than physical gold, a much larger set of investors can invest in the digital version. Investors can invest in fractional amounts, avoid the high transaction costs such as making charges, and have lower investment threshold.
A host of benefits such as hedge against inflation, flexibility, lower transaction cost, and no floor or ceiling limits on the investments are offered if an investor invests in digital gold. This way, an individual can build wealth steadily, save on wasteful expenditures, and enhance long-term financial discipline through the setting up of automated investments. An investment growth requires tracking, making adjustments in contributions based on change of investment and financial goals, and rebalancing it whenever necessary. Digital Gold investments have also got market risks due to its price fluctuations, risks associated with technology platforms and even some kind of security concern.
