Did you know that gold has achieved a 6.5% increase in its price since the start of 2023? Gold investments are a great way to combat market inflation that impacts other investment instruments. Plus, gone are the days when buying physical gold was the only option, as you can own gold digitally through avenues like sovereign gold bonds. But how to invest in sovereign gold bondsand other gold instruments if you are just starting?
Stay with us as we traverse the entirety of gold investments and explore the different ways you can park your funds in gold to gain better returns!
Historically, Indian households have leveraged gold as a suitable hedge against inflation while appreciating the metal's lustre. Fast forward to the 21st century, the rise of mutual funds, bonds and equities has made gold investment easier, eliminating the need to visit a physical store.
Here’s how to invest in gold in India:
The Reserve Bank of India offers sovereign gold bonds on behalf of the Government of India. Gold bonds are available in multiples of one, with 1 gram of gold as the mandatory minimum investment. The best part about sovereign gold bonds is that you receive an additional 2.5% interest annually on your investment. Plus, the lock-in period for most sovereign gold bonds is five years.
Dedicated gold mutual funds invest at least a significant chunk or all of their investors’ money into gold or gold-related instruments. These fund houses can also invest in companies that mine or extract gold. Since these are mutual fund investments, you do not need to invest in physical gold directly. However, you gain returns based on the performance of the precious metal and the companies that acquire it.
Gold ETFs operate similarly to mutual funds, except these are funds that can be bought and sold on the stock exchange. One unit of a gold ETF is equal to one gram of gold. You can either invest according to the market trends displayed by gold or commit to a systematic investment plan to average your holdings.
While gold is a fluctuating instrument, it has always provided a method of diversification for investors. But is gold a good investment? Here are some reasons why it’s a great addition to your portfolio:
Gold is constantly in demand due to its use as jewellery and high monetary value compared to other metals. Hence, you can sell your gold quickly if you need funds.
The value of gold is independent of the movements of the financial market. When the prices have increased, the value of gold hasn’t gone down or depreciated to mimic the trend. On the contrary, the price of gold goes in the reverse direction of inflation, making it a safe investment option.
Is gold a good investment? One of the major reasons it is considered good is diversification, a reliable way to minimise investment risks. For instance, if you invest in gold, stocks and index mutual funds, you can breathe a sigh of relief during the financial crisis in the market.
While the returns of shares and mutual funds may depreciate, gold might compensate for the temporary loss in profits. As an investor, you increase your chances of building long-term wealth.
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The best way to invest in gold is to purchase digital gold or invest in related mutual funds or ETFs to avoid direct interaction with the market.
Gold has always acted as a hedge against inflation and appreciated even during rising prices. It is a good investment to diversify your portfolio and stay secure against market movements.
The value of gold does not follow the general market trends. Hence, it generates a different response when other avenues like FDs and shares are downward.
A gold investment in India is a good idea to leverage the value of the metal and build long-term wealth.