Shaky unstable markets like the one we’re witnessing can undoubtedly have an impact on our financial future, especially if you invest in equities and related securities. Opportunities like these may show you the vulnerabilities in your portfolio. If you’re looking for safer assets to hedge your investments then gold is a tried and true friend.
Gold has been around and existed as a form of currency and investment asset for a long time in modern human civilization. Societies, economics, and entire nations place their trust in gold as a security, because it is reliable and a safe bet to fall upon even when other forms of fiat currency fail us.
You might notice that gold prices tend to shoot up every time stocks falter, mostly because people believe in the long-held belief of securing your long-term investments through gold, and flood to the asset to offset their portfolio’s losses.
Here are a few reasons you should invest in gold too:
Hedging against turbulences
Hedging refers to the act of safeguarding assets such as your investments, from depleting. Gold has historically been demonstrated to hold its value. Due to its malleability and easiness to pass on from one generation to another, it remained as a valuable form of investment. Even today, if the value of the rupee depreciates, gold prices will not only hold their own and remain relatively stable, they might even sky-rocket as people tend to flock to the security, in turn raising gold prices.
Similarly, in times of geopolitical tension too, gold has the ability to stand its own, since it has a near negative correlation with the markets. This, however, doesn’t apply to gold-related securities. For instance, while gold prices have been steadily increasing right now, the stock price of popular gold retailer TBZ will still move with the markets and can be down.
Hedging against inflation
Investing in gold is also a good way to combat the steady rise of prices against inflation. Since gold has a constrained supply and ever-growing demand, its price, in the long run, only steadily increases.
Investing in gold, is thus, an opportunity to grow your money faster than inflation so that your investments can maintain their purchasing power in the future.
Stability and reliability
Gold also offers a reliable and stable way to invest because gold prices are relatively uniform across global markets. When you purchase physical gold, it's fairly easy to liquidate your asset as gold prices generally climb over time, and most banks and local jewelers offer immediate cash at the going rate provided by the quality and mark of the metal. While storing physical gold does come with its challenges, bullions and jewelry can often also be used as collateral to take loans against.
Different ways to invest in gold
Apart from the traditional route of purchasing gold in its physical form there are tons of new options on the market now, towards investing in gold hasslefree such as gold schemes, digital gold, gold etfs, mutual funds etc.
Let’s break down 4 popular options- Gold ETFs, Gold Mutual Funds, Sovereign gold bonds and physical gold to see how they compare and what their different tax implications are:-
In the end, there are many different options available to investors looking to diversify their portfolios with gold, they should base their decision on their investing expertise, objective, and risk tolerance.