Gold Investment: Advantages and Disadvantages To Consider

Updated: Saturday, September 3, 2016, 8:24 [IST]

In spite of a wide range of investment options, Indians love for gold cannot be matched. In India, Gold can be invested in different ways other than buying physical gold.

Gold prices mostly depend on international prices of gold, which could work purely on the demand and supply. Many investors turn to gold only in times of uncertainty across the globe and dump the same when the economy recovers.

Here are some of the advantages and disadvantages of investing in Gold:

Portfolio

Gold as an asset class must be part of your portfolio which will grow during economic uncertainties. It is considered as a hedge, in times of geo-political uncertainties.

Let us give an example. Say, you have invested all your money in shares. What happens when markets crash due to political problems. At this time gold will rally and prevent a complete disaster in your finances.

Liquidity

Gold can be liquidated easily in case of of emergencies. Unlike other instruments, it will take will not take time to liquidate.

Gold Loan

One can avail loans on gold, and it doesn't require many documents. Only a few documents such as ID proof and address proof is enough. Gold loan interest rates are lower as compared to personal loans and this is probably the edge.

Different Options

Individuals looking to invest in gold can consider options like Gold ETFs, Gold funds which usually track gold. You do not have to worry about theft nor storages charges. Gold ETFs track gold prices, which is also a big positive.

No Regular Income

Gold is an asset which does not provide any regular income unless invested in governments' gold monetization scheme.

Unlike other investments such as mutual funds, real estate and stocks, it does not generate dividends and rents.

Storing gold

If you believe in physical gold, storage is the biggest issue. If you place your jewellery and coins in a bank locker one needs to rush each time when needed. Also, one needs to pay the locker maintenance charges each year.

Reselling of Gold

Most of the individuals buy gold jewelry with the intention to sell when in need which is a very bad idea. When selling your jewellery items, making charges and wastage charges are not considered which forms a major part of payment.