Why, How, When, How Much to Invest in Gold?????

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People across the globe are interested in and attracted towards Gold. Since ancient times Gold reserves have been a great attraction for kings around the world. Many wars have been fought for controlling gold reserves. India was called Golden Sparrow. British ruined and looted gold from palaces and temples across the country, where gold was stored.

Whether it is India, America, UK or Australia, people are interested to invest in gold. At the same time they hesitate because of their queries and confusions. Whenever anyone starts doing anything first time then he or she has some queries in mind.

 A wise investor before investing in gold would like to know why, when, How and how much to invest in gold.

Why people invest in Gold?

  • People invest in gold to beat inflation cost in keeping the idle money. In long run gold investments have given a return of over 10%.
  • Gold investment has a high degree of liquidity and can be converted into cash in a very short time span whenever needed.
  • Gold can be kept as collateral security for taking loans from various banks and private financial institutions in case of personal or business need.
  • In traditional families gold investment is considered as a pillar or foundation of strong financial status.
  • According to analysts, gold investments have given good returns at times when equity markets are in bear mood or are falling.

How to invest in Gold?

                Investment in gold can be made through various routes or in various modes.

  1. Jewelry and Gold Coins (Ages old and traditional way):- In India jewelry buying is a fashion among ladies and even considered pious on many occasions. Investing in form of jewelry and coins involve making charges and at times these are very high. Quality issues are also there as news have been there that even very renowned jewelers are selling 16 to 18 carat gold jewelry and claiming it to be 22 carat.
  2. Gold may be purchased in form of Bars or other physical forms. These may be purchased from jewelers or sources like MMTC outlets or banks etc. Safety concerns are there in all physical forms of gold whether jewelry, coins or bars. Physical gold may be kept at home or bank lockers.
  3. Gold ETFs are funds which invest people’s money in gold. So one can invest his money in units of these funds through D mat account with an exchange broker where these funds are traded. These funds are managed by professional fund managers and they take better decisions regarding timing of buy and sell transactions. Broker of Gold ETF transaction charge from the investor for stock exchange fee / charges, for ETF’s expense and profit and his brokerage.
  4. Fund of Gold ETF Funds:- There ae many funds which invest money in Gold ETFs and in turn Gold ETFs invest in gold. An investor may invest his money in such funds through D mat account with a broker.

Who and How Much it invest in Gold?

Each individual can and should invest in gold. 10% to 20% of one’s total investment value may be invested in gold in any of the physical or D mat form. However liquidity, safety and ease of transaction are better in D mat form (Gold ETFs and Fund of Funds)

CA Sanjay Kumar : Author may be reached at editor@businessmantranews.com

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