| How to Invest in Gold? |
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| Written by Site Administrator | |||||
| Tuesday, 27 October 2009 11:19 | |||||
Is Gold a good investment option? This question is not easy to answer. However, Gold prices have appreciated reasonably over the past few years. Moreover, Gold is also available in the form of points in the stock market with select companies. This virtual holdings give a lot of convenience and flexibility to investors making buying and selling gold stocks very easy. If the recent trend in Gold prices is anything to go by, an investor can easily expect a return of upto 9% in long term. Gold as an asset is quite independent of trends of currency fluctuation, inflationary ups and downs and also the global effects of economy on your stocks in the volatile market. This makes gold a better and a safer haven for investors. Gold is definitely an asset that can help protect your hard-earned money. A portion of your investment portfolio must therefore have a component in the form of assets in Gold. You can invest in Gold based on your needs. 1. Gold in physical form If you are looking at the Gold being useful for your family needs, you could buy it in physical form – bars, biscuits, coins or even jewellery. Gold in all these forms can be used for future needs of your family in the form of jewellery that you can gift or use for ritualistic and ceremonial events such as weddings, etc. Gold when bought in this form is not easy to sell back as many Gold vendors would not like to buy back at the current market price. The logic is that, they buy in bulk from their own suppliers and get it cheapers than when they are buying back for you. You can still sell it to Gold vendors, but you are unlikely to get the same value for it as the current market holds. The next best option you have with physical gold is that you can pawn it and take a loan for your immediate needs. Many banks and Pawn brokers would give a loan on your Gold if you produce the right documentation (such as your purchase bills, etc). To sum up, the resale value of Gold held in physical form is not always profitable. It is recommended that you buy gold in physical form only so much as you would need for the future needs of your family. 2. Gold in Dematerialized form Gold is also available in the stock market in the form of Exchange Traded Funds (ETFs). As these are listed and traded on the stock market you can buy and sell them like any other stock with a lot of convenience. Gold stocks are traded in units of one. You will need a demat account and a share trading account with any broker who deals in Gold stocks. ETFs of Gold fluctuate with the existing market prices of Gold. When trading in Gold, you will get close to this market value. You expenses on tanes and other brokerage related fees is unlikely to exceed more than 1% of the market value. Advantages of holding Gold in Dematerialized form With physical Gold you are always concerned about the purity, of having the hallmark or the KDM certification donw, of storing it safely, of security issues when you have to travel or leave your home for long, etc. With gold in demat form, you will not have all these worries. You can rest assured about the purity as it is held only virtually. You can trade freely as if you are trading other stocks. You can buy when the prices are less and sell the stocks when the prices have appreciated considerably. In the event that you need gold in physical form, you can sell the appropriate Gold ETFs and take the money to your nearest gold vendor to buy gold. By doing this, you would have safeguarded yourself from rising price of gold. To sum up, Gold is an asset where negative fluctuation is almost zero. You are never going to go wrong with your Gold investment portfolio if held in demat form. Comments (0) |