Some styles don’t go out fashion. They may be hidden from public eye but they always come back. Gold is just like the staple LBD in our wardrobe. We need gold just like we need an LBD in our wardrobe whether we go out partying or not. No girl’s wardrobe is complete without an LBD.
In many Indian festivals, buying gold is a part of the ceremony. Akshaya Tritiya is one of the festivals that celebrates prosperity, hope, joy, success and gold is bought to mark this date.
While many Indians buy gold in the form jewellery, it may not be ideal form of investment. Read this to know some of the best ways to invest in gold.
Despite all the advancements in the financial sector, gold is one of the favourite investment options for individuals. The demand for gold is not seen receding. The demand for gold is likely to increase in the years to come. Gold not only enhances the beauty of the wearer but it is also an ideal investment option.
The objective of diversification is to minimise risks. Just like we keep cash in different pockets, your portfolio also needs diversification. High risk instruments such as equities may give higher returns but it will tilt the portfolio towards high risk zone. Low risk investments like gold are needed to balance your portfolio. Experts recommend gold to hedge against fall in the market due to geopolitical tensions etc. It is because gold prices and stock prices move in the opposite direction. Hence, when the stock market is not performing well, gold tends to perform better.
Allocation towards gold in the portfolio should be kept minimal as the objective of investing in gold is to safeguard the portfolio from blowing up and not wealth generation. Experts recommend that the allocation of gold in a portfolio should not be more than 5%.
In the last few years, gold has underperformed equities and has only managed to give moderate returns. As a result, it has lost its sheen. However, it is likely to change as gold prices are likely to increase in the next few years. It is because gold becomes the favourite asset class among investors during geo-political tensions. In the recent times, the fear of geo-political tension is heightened due to steps such as on protectionism taken by the US President Trump. The relationship dynamics among the different countries are changing and drastic steps taken by the US government may slow down global growth.
Besides, the geopolitical tensions, the price of crude oil has also increased due to supply cuts and as crude oil is one of the major imports of India, crude price can have an inflationary impact on the Indian economy.
Hence, a hedging investment is important during volatile times. And gold is one of the best safe haven instrument. The increase in volatility will increase the demand for gold thus leading to spike in gold prices.
Inflation eats away our savings. The real impact of inflation can be felt over a long course of time. Inflation reduces the value of rupee. As gold can be basically in a physical form such as gold bars or gold coins or it has backing of physical gold e.g. digital gold and gold ETF, it can be invested to hedge against the eroding power of the rupee. Although gold may not give eye popping returns, historically, gold has managed to beat inflation. It means gold has given more returns than the growth in inflation.
Gold has been a favourite asset class for many investors. Gold gives stability to any portfolio and hence it can diversify the portfolio, protect from the market risks and rising inflation. We need gold just the way we need trace nutrients in our diet. Though we don’t need trace nutrients in large amount, it is necessary for the smooth working of our system.
So, this Akshaya Tritiya invest in gold and safeguard your portfolio from other risks.Tags: gold, gold investment
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