Investing In Gold and Other Options For Retail Investors

Investing In Gold and Other Options For Retail Investors

Gold has been the world's currency of the choice from ancient time civilizations to the modern era. It is not only known to serve as a portfolio diversifier but also considered as a perfect hedge v/s inflation.
indiagold team
28 Mar 2022
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People in India deemed gold as one of the key investment options and as a Store of Value. However, before investing in gold, you need to get an understanding of how gold works. Like any other investment, an investor runs the fear of loss – and this risk gets magnified if you aren’t aware of the market.

There are several benefits of investing in gold in the long run. People believe in this theory and depend on investment in gold when the other assets are not stable.

In the year 2020, when the equity markets were crashing due to the unexpected Covid-19 pandemic, only gold emerged as a savior. Investment in gold offers a great hedge against political unrest and inflation. In addition, to lower the overall risk of the portfolio, top investment advisors have always suggested investing in commodities, including gold.

Gold has performed exceedingly well over the past 20 years, making it one of the best assets to save in. Here’s the price performance of gold: Screenshot 2022-03-28 181646.png

Why investing in gold is always profitable:

Gold can protect against inflation risk:

When it comes to investment, inflation is the one thing that you need to understand because it can kill your investment in the long run. It has come to the notice that gold has always outperformed the rate of inflation over past years.

You can curtail the risk by a huge margin if you have some of your savings in the form of gold. Gold has been a favorite investment of most people across the world, and in the long run, you will never regret having your investment in gold. Gold serves as the best hedge against inflation.

Easy liquidity:

You can easily buy or sell gold from trusted jewelers or banks, which provide a guarantee certificate on the purity of the product. You can also subscribe and redeem your gold fund as per your requirements.

Portfolio diversification:

To diversify the investment portfolio, gold is a convenient and easy way. The historical records have shown that the value of gold does not move in the same direction as bonds and stocks. The value of gold is not affected by the dips and peaks of the stock market.

Tax benefits:

From the income tax perspective, some gold funds are treated as non-equity products. After one year of the investment, you are allowed to claim long-term capital gain tax benefits on such gold funds.

Loans are easily available against Gold:

In case of any emergency, when there is a need for an instant fund, one can easily get a loan against gold within a single day. The amount of the loan will depend on the value of an investment in gold by the borrower. These loans are available at a very low interest rate as compared to the other general loans. Also, the borrower will get the gold back on full repayment of the loan.

Never deteriorates with time: There are only a few assets that do not deteriorate over time and usage, and gold is one of them. The value of gold has never reduced in the long run. Hence, the fear of loss by holding an investment in gold is minimal.

So, how to invest in gold?

There are mainly two ways you can invest in gold – one is conventional and the other is the modern type of investment. The conventional type of investment includes buying physical gold in various forms such as bullions, coins, jewelry, or artifacts, whereas in the modern type of investment, you have other options such as Gold funds & Gold ETFs.

Physical gold:

You can buy physical gold like bullions, coins, jewelry, or artifacts from metal dealers, brokers & banks, and even from e-commerce websites. However, if you purchase gold with the purpose of investment, you should avoid buying gold as jewelry. It is always better to buy pure gold.

Gold mutual funds:

While investing in a gold mutual fund, the mutual fund collects the amount from the retail investors and invests the collected amount in gold ETFs. A gold mutual fund is the actively managed FoF (Fund of funds).

Gold ETFs (Exchanged-Traded Funds):

Gold ETFs are the alternative way of investing in gold in a most cost-effective manner. Investment in Gold ETFs is made on NSE or BSE (stock exchange) where the underlying asset is gold. You need a Demat account for investing in Gold ETFs.

Digital gold:

Digital gold is the modern and new age instrument for gold investment. Digital gold is bought virtually, and there is no need to pay a locker fee. You can convert your digital gold into physical form anytime and anywhere. Nowadays, many websites such as indiagold provide digital gold in just a few clicks.

Sovereign gold bond:

This is yet another way of investing in gold without holding physical gold. These bonds are issued by the government. However, investment in these bonds depends on availability. The Reserve Bank of India issues these bonds on behalf of the Government of India, which makes these bonds the safest option to invest in digital gold. The tenure of these bonds is eight years, where the option to exit is available from the 5th year onwards.

In this new age investment period, some websites provide various services relating to gold investment, gold loans, etc. For instance, indiagold provides several services to people, such as instant gold loans and secure gold locker. You can also buy 24k digital gold and gold coins from the indiagold app. This app can be downloaded here: App Store | Google Play

There are several other investment options available for you in India. However, it has been rightly said that risk and reward go hand in hand. Some of the other investment options for retail investors in India are:

  • Direct equity
  • Equity mutual fund
  • Debt mutual fund
  • Public Provident Fund
  • National Pension System
  • Senior Citizens’ Saving Scheme
  • Bank Fixed Deposits
  • Real Estate.
  • Pradhan Mantri Vaya Vandana Yojana

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