Friday, December 2, 2011

[] Gold as an investment option


Gold as an investment option

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If you have been researching investment options and studying about ways to grow your money, by now you must know that it is essential to have a diversified investment portfolio.

The objective behind diversifying your investments is to control the risk factor and maximize the returns on your investments.

It is best to categorize investments according to their risk and the returns they pay and invest your money in different categories as per your appetite for risk.

A portion of your investments should be in Gold.

Gold is a preferred type of investment amongst Indians. However, one should invest around 10-30 per cent in Gold. The exact per cent depends upon an individual's personal comfort.

However, a minimum of 10 per cent of your savings in gold is always good to have. You can buy gold coins from any jeweller you trust, Indian post offices or banks.

Advantages of gold investments

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Growth in value: Gold has always been a favorite form of investment amongst Indians because of the potential growth in gold prices. It is common practice to buy gold when a child is young in order to make jewelry for the child's wedding! From old times, gold is a valuable investment.

The value of gold has only increased with time. The average growth rate of gold is 20.3 per cent. Isn't that greater than the interest rate on FDs? Also, a gold investment is less risky than a stock market investment. So, if you purchased Rs.5,000/- of gold in 2005, its value today would be around Rs. 10,075/-. That is more than double your original investment!

Safe from economic upheavals: Even in a recession hit economy, gold fares well. Therefore, this is a safest investment during recessionary times.

Note that the world economy has been in a recession for the past 3 years. Yet Gold has remained a faithful investment through the bad economic times. In India the price of gold increased substantially in the past 3 years.

Some other benefits

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Liquidity: Gold can be converted into cash easily. You can go to any jeweller to exchange you jewellery / gold coins for cash. Also, there are no boundaries to its liquidity.

In case of an emergency, you can sell a piece of jewelry anywhere in the world and get instant cash!

My friend lost her wallet while travelling and her finger ring came to her rescue - she could sell off her ring and buy her return ticket!

Less risky: In comparison to other high return paying investments like stocks, an investment in gold is a low risk investment. Even the Government of India has certain savings in Gold!

Alternative uses: Although not the best form to keep gold for investment purposes, it can be made into jewellery. So, one can enjoy the investment, use it while it grows!L

Is jewellery a good form of investment?

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No. While gold is a very good form of investment, you can get its best value when it is kept in the form of gold coins or 24 karat gold rings. Gold jewelry is never 24 karats gold.

In order to make a design jewelers use 18 to 22 karat gold. So, that reduces the value of your investment. Further, most jewelers in India pay a lower price for a piece of jewelry purchased from another shop. So, if you cannot take the ornament back to the same jeweler, then you will lose money.

Another factor is that labor charges for making jewelry are high. So, when you sell any ornament, you lose the amount of labor charges you paid to make it. Therefore, if you are looking at gold as an investment, it is best to stick with gold coins, gold biscuits or gold rings of 24 karat gold.

However, the prices of 18 - 22 Karat gold also rise over time. So, even if you buy a piece of jewelry with no intention of using it as an investment, it will still increase in price over time and you will get good value for it.

But, if investment is your sole purpose, you should buy 24 Karat gold onl

Venu Haridas

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