Gold - An Investment

In the previous two blogs we saw-
  1. Gold does not necessarily out beat other asset classes. 
  2. Because of the way we "Buy" Gold, the returns further diminish. 
Gold can never become an investment. It is purely an hedge, 
Hedge  - 
        • against Inflation, 
        • against a falling equity market or 
        • against a collapsed debt market. 

So it would be naive on our part to "Invest in Gold" and expect out sized returns.   

So in this blog, we would like to layout probably an easy guide on how to handle Gold as an "Asset" for layman investors. 

Allocation -  Try and keep 10% of your Net worth in Gold.   

Options for Investment - 
 
1. Physical Gold (Jewellery) - If you have no gold at all then start a monthly Gold Scheme for 10% of your savings and start accumulating the same. Sometimes, you might already have Jewelry but if you prefer accumulate further gold in Physical form then continue to do this or buy as gold coins. 

2. Gold ETFs - Best suited for somebody who is interested in saving a fixed % monthly but does not want to buy Physical gold. Also it suits Investors seeking to move investments from one asset class to another. 

3. Sovereign Gold Bond - Introduced by Govt of India in 2015, this we believe is the best way to stay invested in Gold for longer periods of time since it is highly secured, in demat form and investor gets an additional interest of 2.5% on top of Nominal Gold Price appreciation. 

Below for the ease of our readers a comparison between the 3 options -
Source - Quora
Note - tax is applicable on SGB if one sells the same in secondary markets before maturity which is before 8 years. Interest received is taxable as per tax slab. 

Today investors are investing in gold seeing the returns so they also need to know which is the best choice for them. Just like understanding an Insurance or Mutual fund before buying is important, if Gold is chosen to be invested in, we need to understand the mode of investment and allocation and proceed judiously.

For financial planning and investment-related queries, write to us at dropletadvisory@gmail.com or call us at 9962399924 / 9551373455. 

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