Before Investing in Gold, it is very important to know why to invest in gold. This post is all about ways to make money with gold. Nowadays we have a wide range of options from stocks to cryptocurrencies.
Let’s have a look at the pros of investing in gold.
Why You Should Invest In Gold?
Helps In Hedging
It helps in Hedging a lot in various ways. Let’s assume that the stock market has crashed then at that time people began to take out their money from stocks and began to invest in gold because people start doubting and thinks it as unstable. This led to an increase in the value of gold.
So if you have invested all your money in stocks and it got drastic fall then you have severe financial trouble and value of your investment will also decrease.
Used As a Symbol Of Wealth
Next reason for choosing gold as an investment is that it is considered a symbol of wealth across the globe.
From the ancient Era gold has been used as a worldwide accepted currency.
If we measure returns of investment from gold in recent years then it is considered quite good. Gold had provided a return of 9.6% as Compound Annual Growth Rate (CAGR) over the last 40 years.
As prices of gold had increased recently that’s why in last 5 years it had given a return of 12% CAGR which is a quite decent percentage.
Gold Is A Store Of Value
You might have noticed that sometimes the value of currency gradually decreases but the value of gold keeps consistently increasing.
Also during the Covid period in spite of instability in currency and economies, the value of gold was almost same.
Gold prices might fluctuate in short term but in long run, it has always held its value. It worked as a buffer during inflation over years, thus making gold worthwhile investing.
5 Best Ways To Invest In Gold in 2021
As we have discussed above reasons for investing in gold so it’s time to understand Best 5 Ways by which you can invest in gold in 2021.
Physical gold includes jewelry like gold chains, rings, earrings, gold bars, gold coins, etc. The minimum amount of gold you require to start your investment in physical gold is 1 gm Gold. It will cost you around $60.562 and it can change according to country.
Physical Gold Risks
Before starting investing, it is very important to understand factors of risk. While investing in physical gold, you have to look after various factors like:
Gold Charges And Fees
Whenever you buy any gold, jewelers will take a minimum of 8-10% of making charges which might increase up to 10-15%. Then you will also get the expense of transporting and storage fees which can be calculated around 4%. Therefore fees get increase due to all these charges.
Along with these points, you have to also focus on factors such as availability, liquidity, Tax, returns, etc.
It is introduced to resolve all the problems we are facing in physical gold i.e., you can buy it online and the company will purchase and store it for you.
The best advantage of digital gold is that you can buy it merely in a few dollars.
One risk over here is that it doesn’t come under any regulatory body as mainly 3 companies provides digital gold (i) Augmont Gold (ii) SafeGold (iii) Swiss Excellence ( India)
There is not much risk as these are reputed firms and can be trusted.
Fees in digital gold remain pretty much than physical gold as selling prices will be around 6% less than buying price.
The reason for reduced fee in digital gold is reduced price of Hedging, Insurance, transportation, market volatility, etc.
The best part of digital Gold is that you can buy it 24 x 7.
Gold Exchange-traded Funds are commodity-based mutual funds which are traded similar to shares in stocks. Minimum investment requires in Gold ETFs is approx. $68.28 ( can be changed) for 1 gm Gold.
Risk of ETFs depends on the prices of gold in the market. In this you have to take care of factors like brokerage, expense ratio, Demat account charged, etc. It is available according to market hours. It has also good liquidity as you can also sell it in market hours.
Gold Mutual Fund
These mutual funds are managed by different asset management companies which usually invest in ETFs. You can start investing in Gold Mutual Funds at minimal prices. Risk in this type of gold also depends on market factors.
Fees on Gold Mutual Fund are similar to that of Mutual Funds along with 0.1-0.2% which is taken by the asset management company to manage these funds.
Its liquidity and availability are similar to Gold ETFs. You must remember that if you sold your Mutual Fund before one year then you 1-2% will be charged as Exit Load.
Sovereign Gold Bonds
This was introduced by the government of India in 2015 in which you purchase a bond of a certain amount and then the government will back it by same amount of physical gold. Minimum investment needed to start sovereign gold bonds is to purchase at least 1 gm gold.
Risk in this bond is minimal and zero expense ratio. It usually comes in tranches which last for one week. It is available both online and offline.
These bonds remain lock in for 8 years and you have also take premature exit at five years.
In this bonds, you will get not only get the benefit of interest when gold prices increase but also get fixed income interest of 2.5% which is paid twice in one year.
So we have discussed reasons regarding why you should invest in gold and later here are also the best 5 ways mentioned by which you can invest in gold.
- Physical Gold
- Digital Gold
- Gold ETFs
- Gold Mutual Funds
- Sovereign Gold Bond
It is a smart choice to have good research and information before investing at any place to get the best returns out of your investment.