Wednesday, 31 December 2014

Gold as an investment option

Before proceeding further let us answer a basic question in our mind. Why to invest in gold? Should I invest in gold? Is gold a good investment option?
It is your hard earned money. So you need to answer these questions before investing in gold. Why do people invest in Gold? What are all the benefits of investing in gold?
There are 2 primary reasons why you need to invest in gold.
  • Investing money in gold is worth because it is a hedge against inflation. Over a period of time, the return on gold investment is in line with the rate of inflation.
  • It is worth investing in gold for a one more very valid reason. That is gold is negatively correlated to equity investments. 
The above 2 points could have given some answers to your question “Is buying gold a good investment?”
Return on gold investment
Is it profitable to invest in gold?
This investment proved remarkable from 2006 to 2011.During that time span Gold has given average return of 29% per annum which was any day better than other investment options.
However, the long term average return on gold investment is less than 10% p.a.
As one can say technically or ironically but history always repeats itself. Therefore, we may once again observe the similar less than 10% appreciation pattern in gold prices in near future.
Still, if you want to invest in Gold and cannot resist yourself from the temptation then these are few tips on how to invest in gold correctly!
1) Jewellery buying
Our age-old and traditional way of investment is jewellery buying where one can buy gold ornaments, bars or coins. However, it has its own disadvantages, total buying cost involves heavy making charges (it can be 10 to 20% of total cost).However, when you try to sell the same piece to same jeweler, he will buy it below market rates and deduct those making charges from the total price of your jewel.
2) Investment in Gold coins and bars
Investment in gold coins and bars is also a better option over jewel buying. You need to decide on ‘Where to buy gold coins or bars?”. You should buy gold bars and coins only from jeweler. Banks also sell gold coins or bars. Then why do we advocate for buying god bars and coins from jewelers? To answer this question you ask yourself “How to sell gold coins or bars?” or “Where to sell gold coins in India?”

Banks sell gold coins and bars, but they cannot buy it back. Whereas, the jewelers can buy back the gold coins from you.

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