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Gold Investment
Gold Investment
Gold is one of the most preferred investments in India. High liquidity and inflation-beating capacity are its strong selling points, not to mention charm, prestige, and so on. Gold prices shoot up when the markets face turbulence.
Gold investment can be done in many forms like buying jewelry, coins, bars, gold exchange-traded funds, gold funds, sovereign gold bond schemes, etc.
SOVEREIGN GOLD BONDS
Sovereign Gold Bonds are the safest way to buy digital Gold as they are issued by the Reserve Bank of India on behalf of the Government of India with an assured interest of 2.50% per annum. The bonds are denominated in units of grams of gold with a basic unit of 1 gram. The maximum investment one can make is 4 kg. These bonds have a tenor of eight years with an exit option from the fifth year onwards. It’s again a hassle-free way of gold investing as you have the ownership of gold without any physical possession.
WHY SHOULD YOU INVEST IN GOLD?
The primary reason for investing in Gold is portfolio diversification and, in that context, it is considered to be an ideal hedge against the potential volatility of equity investments as well as inflation. Apart from the returns offered by Gold, another key reason for using it as a hedge is based on the fact that it has historically shown lower volatility than equity investments over the long term. In fact, in many cases, it has shown an inverse correlation to equities, i.e., returns of Gold have historically been high when equity markets have witnessed a downturn.
1. Digital Gold : These can be purchased through various apps in denominations starting from 1 gram onwards.
2. Gold ETFs: Gold Exchange Traded Funds are traded on stock exchanges just like shares and primarily feature Physical Gold and stocks of gold mining/refining as the primary underlying assets. A Demat (Dematerialized) Account is mandatory for investing in Gold ETFs.
3. Gold Mutual Funds: These are mutual funds managed by various asset management companies (AMCs) that follow a fund of fund structure and primarily invest in Gold.
4. Sovereign Gold Bonds : These bonds are periodically released by the Reserve Bank of India (RBI) and available for purchase through leading public and private sector banks. While these bonds are guaranteed by the Government of India and pegged to the price of gold, they actually do not have physical gold as an underlying asset.
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