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Written by Vertical Grass
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Monday, 28 May 2012 10:29 |
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“A friend in need is friend indeed” is a very true and famous saying but suppose If we change this phrase and call it in financial terms then the statement will be “A financial asset in need is financial asset indeed”. Generally we can see that every individual invest their money in financial assets in such a way to build up the portfolio in best way as possible. While looking at these types of investments, one question arises “Are they smart investors? Do they know about all the options available in the market in order to prevent from drowning in times of economic crisis such as currency depreciation, inflation, and stock market crash?” The answer to this question is if you are a smart investor and love your hard earned money then you should invest a part of the money in Gold.
IMPORTANCE OF GOLD INVESTMENT
- It bears the same worth as property as it’s a precious metal i.e. it’s durable.
- It endures the best test of time.
- It’s universally accepted as one of the best financial asset to possess in rough economic condition.
DIFFERENT TYPES OF OPTIONS AVAILABLE IN GOLD INVESTMENT:
- Jewelery
- Gold coins
- Gold bars
- Gold ETF’s
- eGold
- Gold mining stocks
Now let’s discuss about the pros and cons related with each type of gold investment in order to make easy for the investors to decide the best option for their investment.
Jewelry:
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Pros
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Cons
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- Easy investment as only needs cash to invest.
- Early investment helps at the time of urgency like marriage or medical treatment.
- Acts as a status symbol.
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Fear of theft as it is in physical form.
Making charges offsets the profit in terms of price appreciation (varies from 10% to 35% at times).
Normally it’s a virtual investment as people don’t want to sell it.
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Indians believe that investing in gold is the best option as it involves multiple reasons like:
- use it for marriage
- wear in parties
- Get it liquidate in the time of crisis.
Gold Coins:
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Pros
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Cons
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- Bears Value as worth of international gold price.
- One of the most recognized and reliable way to invest in gold
- Investment is very easy as we can buy it from banks, local shops etc.
- Big investment is not required to take exposure as it’s available in smaller denominations.
- Easy to store and hide as it is tangible
- Very liquid.
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Fear of theft as it is in physical form.
A premium of 4% to 10% is to be paid while buying and same % is discounted while selling resulting in lesser overall return.
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People should prefer to invest in gold rather than investing in gold jewelry as due to following reasons:
- Purity is guaranteed unlike jewelry as the gold coins are sold by the bank.
- No risk involved
Gold Bars:
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Pros
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Cons
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- Bears Value as worth of international gold price.
- Premium/discount paid while purchasing and selling is the least
- Most recognized and reliable way to invest in gold.
- Investment is very easy as we can buy it from banks, local shops etc.
- Quite liquid.
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Fear of theft as it is in physical form.
Initial investment can be large as smaller denominations are not available.
Increased risk of forgery.
Storage cost for large bars.
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People should go for this investment if:
- It is a large investment initially
- Comfortable with storage
- Less risky in terms of loss in premium/discount
- Proper check of fake issues
Gold ETF’s:
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Pros
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Cons
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- Investment is very easy as there is a need of just a demat account for investment.
- No concept of losses in terms of premium or discount.
- Safe as no physical possession.
- Low initial investment.
- Various options available because of technology advancement like SIP etc.
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- It is intangible in nature.
- Might have liquidity issue.
- Complex structure.
- Transaction fee and annual maintenance charges.
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- It’s a new option and is not as popular as physical Gold.
- Investors who usually invest using demat account are aware of this option.
- They provide very easy access to gold investment without having the burden of physically owning it.
eGold:
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Pros
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Cons
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- Very similar to Gold ETF.
- It is in demat form. Hence no fear of theft.
- Easy to invest and start.
- Can be converted to physical gold whenever investors wish
- It can be redeemed easily.
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- Similar to Gold ETF
- Another disadvantage could be that the facility to convert it in physical gold is available at few cities.
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Gold Mining Stocks:
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Pros
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Cons
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- A way of taking indirect exposure.
- Capital appreciation potential is more as compared to direct investment.
- Safe as no physical possession.
- Low initial investment.
- Highly Liquid.
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- You don’t possess it in physical form so you might be at loss if the Gold deposit yield is less than expected or if the company faces bankruptcy.
- Deep research required before investing.
- Volatile and risky as compared to other options.
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- It’s one of the most creative investment options
- Requires a lot of careful research before investment.
- Best for seasonal investors
CONCLUSION:
Finally we can conclude that investing in gold is a very good option for any individual as gold investment acts as the best shield during the situation of economic downturn and crisis of any individual or any nation.
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Last Updated on Monday, 28 May 2012 15:40 |
