Benefits Of Investing In Gold This Year
Gold is undoubtedly the most preferred investment option, considering the reverse trend it follows. Unlike the other investment options, when the market crashes, demand for gold increases instead of falling. The only shift that has taken over in this sector is that investors are now purchasing it online instead of buying physical gold.
To know more, keep reading this article. There’s information about each investment option, its benefits, and comparison in the following section.
Reason To Invest In Gold
One of the most important reasons to invest includes diversifying one’s portfolio. By having gold as an investment, investors also safeguard the potential risk of equity investment and inflation. According to statistics, the average annual gold return as recorded in 2020 amounted to about 24.6%. This is the second-highest return an asset provided that year after silver.
Apart from the returns, investors also use it as a hedge. It shows lower instances of negative return thus having lower volatility than equity investments.
Different Ways To Invest Gold In 2022
People have been investing in physical gold for a long time, including coins, jewellery, bars, etc. However, there were some limitations. For example, purchases become expensive due to making or designing charges. It also includes storage expenses because of increased security and insurance requirements. In addition, there is inconvenience due to the involvement of impurities and purity certificates.
This is why investors choose to invest in the following forms:
Digital Gold
There are online platforms that offer digital gold investment buying options. The best part is one can start making transactions digitally at market price and redeem them at the time of sale. Generally, investments here are backed by physical gold since the institutes have tie-ups with gold manufacturers and traders.
So, there are two options: either investors can redeem investment return value or request the physical delivery of gold worth the same value. However, a point to remember here is not all platforms provide delivery.
Gold ETFs
It means exchange-traded funds invested in gold. Similar to ETFs, these too are sold in the stock market. So, investors who want to purchase this investment type have first to open a Demat account. Also, having an ETF investment does not mean the holder is the owner of physical gold, but they get total exposure to how gold is performing in the market.
Sovereign Gold Bonds
After the Reserve Bank of India took a few initiatives, they introduced Sovereign Gold bonds in 2015. The objective behind this launch was to offer investors an alternative investment option in solid gold. Not only this, but this bond type comes with a 5-year lock-in period term, so the holder of these bonds can redeem the value in cash later. Also, it does not involve management charges and physical gold backs it.
Gold Schemes
It is widespread for jewellers to develop different gold schemes for their valuable customers at regular intervals. To avail this scheme, investors have to put a certain amount like investing in SIP for a specific period. Then, when the scheme matures, investors get a large sum of money in hand for the investment they hold.
Benefits Of Investing In Gold
There are several benefits that investors enjoy by investing in gold. Some are as follows:
- Funds are easy to sell and purchase no matter what business hours. Moreover, one can carry the transaction from any part of the country.
- It acts as a perfect form of hedge to cover against potential volatility of equity investment, geopolitical instabilities and inflation.
- One can use ETFs to apply for a loan. In other words, it serves as excellent collateral for borrowing money.
- There is minimum risk involved in this investment type even when carried online.
- It increases convenience when it comes to portfolio diversification.
Comparison Between Gold Vs Gold ETF Vs Gold Funds
Gold | Gold ETFs | Gold Mutual Funds |
| It is investing in physical gold. | Here investors buy a considerable gold value, but there is no allotment in physical form. | Investing in gold mutual funds means investing in a company that performs gold mining. |
| While buying one you do not need to open a Demat account. | To invest in this option, investors need a Demat account. | Here investors do not need a Demat account. |
| For this investment, the price is affected by the market’s fluctuation. | If there’s a change in gold prices, it can affect the value of ETFs. | Values of gold mutual funds remain unaffected even if there’s a price change. |
| Here investors do not have to bear any additional charge other than designing or making charges. | Investors may have to suffer brokerage or asset management charges in ETFs. | It involves a minimum charge to manage mutual funds promptly. |
| There’s no requirement for paperwork. | It requires some paperwork for investing in gold ETFs. | Mutual funds also require specific paperwork. |
Bottom Line
Every gold investment option has its own flaws and pros. However, one thing that is sure, no matter which type of investment options one chooses, they carry high returns, including minimum risk and high liquidity. Therefore, by looking at the above comparison, one can decide easily which type of investment he/she wants to go for. This is because even if these investments are comparatively more secure, one should always analyse limitations before making a final investment decision.
