Skip to main content

Gold is a good investment for risk-averse investors

 


   Gold as an investment avenue has been in the news in the last few years because of the turbulence in the global economy. The price of gold is at an all-time high of Rs 19,000 per 10 gm. Historically, gold has been a haven for riskaverse investors and therefore, the price of gold rises sharply during a financial crisis when investors turn risk-averse.


   This has been happening over the last couple of years. The confidence and interest investors have in gold has gone up as both the US and European regions are going through financial uncertainty.


   These are some of the main factors that pushed gold prices in the last few months:

Speculation    

This is the prime driver of gold prices. Analysts believe investor confidence remained firm in gold during the recession, and this pushed it to higher levels. The price of gold eased a bit during the second half of last year as the recession started easing, but it bounced back sharply driven by the financial crisis in the Euro region. Analysts believe fresh money has been pumped into gold based instruments by large institutional investors who have increased their portfolio allocation towards gold as a process of lowering risk in their portfolios.


   The demand for gold has increased over the past few years. In addition to individual investors, many large fund houses, and even some countries' central banks, are looking at buying gold as part of their strategies to reduce risk.

Currency depreciation    

This is another reason why the gold price went up in the European and Asian markets, including India. The price of gold recorded new highs in Euros, British pounds and Canadian dollars due to a sharp appreciation of the US dollar against these currencies over the last few months.


   Investors consider gold an international currency accepted everywhere, without it having a direct relation with any country's economic condition. Many large investors here consider gold safer than cash in the current economic situation.

Diversification avenue    

Analysts recommend gold and gold-based investment instruments as a good investment option for investors looking at diversifying their portfolio from pure equity. The returns from gold-based instruments have been quite attractive in the recent past.


   However, the price of gold has already gone up quite significantly and therefore long-term investors should invest at dips during the correction phases.


   These are some of the investment instruments you can consider, to invest in gold:

Exchange-traded fund    

A gold exchange-traded fund (ETF) is like a mutual fund whose value depends on the price of gold. Usually, each unit of gold ETF represent one gram or 0.5 gram of gold as an underlying asset. The units of gold ETFs have to be purchased or sold on the stock markets and not from or to a mutual fund house.


   To invest in gold ETFs, you need a demat and brokerage trading accounts. Purchased units of ETFs come to your demat account similar to any stock. In India, the gold ETFs are traded on the National Stock Exchange (NSE).

Gold bars and coins    

Investing in gold bars and coins is far more easy now-a-days. Many banks and authorised dealers sell gold coins and bars that are of standard quality. Investors should look for exit options before investing in gold coins or bars. Gold coins purchased from banks or financial institutions come with liquidity issues as banks do not provide a buyback option.


   It is important to understand that investments in ornaments are not the same as investing in gold. Ornaments have sentimental attachments and therefore are not easy to liquidate. Also, at the time of liquidation, the making charges are a loss.

 

Popular posts from this blog

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now