7 Reasons Why Investors Should Go for Investment of Gold in 2021

There are many other precious metals, but gold is regarded as one of the best investments. Moreover, gold is one of the most recommended investments in India due to certain influencing variables such as a high level of liquidity and the ability to outperform inflation. Gold can be purchased in various ways, including coins, bars, jewellery, gold exchange-traded funds, sovereign gold bond schemes, gold funds, and so forth.

Though there are occasions when markets witness a drop in gold prices, it rarely lasts long and always returns to a strong upward trend. Once you’ve decided to invest in gold, you need to carefully consider how you’ll go about doing so. Invest in gold today as there are a lot of benefits of gold investment.

What are the 7 main reasons why investors should go for gold investment in 2021?

7 reasons for investors to invest in gold today to enjoy the future benefits of gold investment are:

1. Invest to Protect Against Inflation

Let’s take this one step at a time, beginning with the definition of an Inflation Hedge. Simply put, an Inflation Hedge is something that maintains its worth even when prices rise. So, in terms of investing, all you want from your investment is to maintain its worth at all times, including during periods of inflation.

According to the general tendency, hard assets, such as precious stones, hydrocarbons, and precious metals like gold and silver, prove to be a wonderful hedge against inflation. 

For example, let’s look at the history of gold rates in Chennai to see how gold has performed as an inflation hedge. Past data shows that gold rates in Chennai climbed at a pace of less than 0.5 percent per year over the twentieth century, implying that the value of gold stayed nearly constant for a full century. As a result, in 2021, gold investment can be relied upon as an inflation hedge.

2. Liquidity

One of the most appealing features to invest in gold today is its easy and quick liquidity, which comes in handy during an emergency and financial crises. Let us gain a better understanding of this by comparing it to real estate. Selling a real estate property for cash is difficult, especially when you require cash immediately. If the owner has no other option, he may be forced to sell it at a lower price. However, if you invest in gold, you can easily trade it in for cash without incurring any losses because current gold prices solely determine the prices, which is the huge benefit of gold investment.

3. Diversification of your portfolio

An individual’s investment portfolio is made up of all of their varied investments. Some of the best investment portfolios, according to market experts, are those that involve investments made in a varied manner rather than those where the complete investments are isolated into a single sector or two. Mutual funds, stock markets, real estate, and gold are some of the most common investment industries. As previously said, gold is the only one of these assets whose value is unaffected by market fluctuations.

Market experts believe that diversifying investment portfolios is beneficial because if one of the investment sectors experiences a crisis, other investments can provide you with a hedge against the crisis. Gold is the ideal hedge in these instances due to its stable prices. In addition, gold has always retained its value throughout history. It has never fallen to zero, making it one of the finest methods to diversify your investment portfolio while lowering the risk associated with other investments, as it is not closely tied to market performance. This ensures the benefits of gold investment at all times.

4. Tangible Asset

Invest in gold today, which is a tangible asset. It is unaffected by natural disasters such as fire and flooding. It also doesn’t require any more investments to keep it safe or maintain it. Plus, it is immune to digital security problems that internet investing methods are vulnerable to, i.e. gold is unaffected by hackers and natural disasters. Not only that, but gold is beneficial even in times of commodities crises.

5. Investing in gold isn’t rocket science

One of the harsh realities of most financial investments is that they require investors to have some prior knowledge to generate profitable returns, so many people avoid making financial investments. However, gold investments do not necessitate any prior knowledge, particular abilities, or an investor’s mindset, making them ideal for people looking to take their initial steps into the world of investment.

Another benefit of gold investments is that determining the success of gold returns is simple because gold prices are all that matters. This means that investors will have to be considerably less concerned about their investments and will only need to monitor the current gold rate.

6. Risk Reduction and Wealth Creation

Many Indian families purchase gold to increase their family’s wealth to be used in a catastrophe. However, even if no crisis occurs, the family gold can be passed down to future generations as a legacy. One of the options available to anyone looking to build their savings is to save money directly. Still, the problem with this method is that it increases the risk of theft because keeping it safe is difficult, whereas if gold of equivalent value is purchased for savings, it can be safely stored even in a house locker.

For instance, on November 8, 2016, demonetization was a well-known example of when gold investments were less risky. This is because people who had their savings invested in gold were not inconvenienced, whereas others who had cash savings had to line every day with their heels over their heads.

7. Demand and Supply aren’t synchronized

The availability of gold in the worldwide market is limited since gold mining output has been low since the 1990s. Still, demand for gold continues to grow, particularly in countries like India. It is a significant element of culture and is given as a gift, as a symbol of blessings and good omen. And it goes without saying that when demand and supply for an item are uneven in this way, prices rise.

What do you Need to Keep in Mind When you Invest in Gold Today?

The best way to look at an asset class is from its allocation in your portfolio. One of several reasons for assigning assets to various asset categories in your portfolio is that, in an ideal world, asset classes would have a negative correlation, allowing your portfolio to remain balanced.

In actuality, there is no such thing as a negative correlation, although a low positive correlation is preferable. As a result, your portfolio will be less volatile, as all of your investments will not rise or fall simultaneously.

The idea for investing in gold is the same: allocate certain funds to it so that your portfolio’s volatility is reduced to that level, i.e., low positive correlation with other assets. The advantage is that risk-adjusted returns, or returns adjusted for volatility, will be significantly higher.

Gold allocation in your portfolio should be based on your profile, investment objectives, and investment horizon. Still, it should be kept to a minimum and should not make up a significant portion of your portfolio.

The most frequent asset classifications are equity and debt; equity is designed for long-term wealth production and economic expansion; debt is designed for short-term wealth generation and relatively stable returns. If you have some gold in your portfolio, you will have less overall volatility than if you had stocks and debt.

What are the Best Ways to Invest in Gold Today?

There are a variety of ways to invest in gold today. The ways are:

Gold ETF

ETF stands for exchange-traded funds. Investing in Gold ETF involves investing in funds that invest your money in genuine gold. ETFs that invest in gold are known as gold ETFs. All you require is a trading account DEMAT account and the brokerage fees payment, which are typically between 0.25 and 0.5 percent of the cost of the Gold ETF. If you want to make some real money investing in gold, a gold ETF is a better option than physical gold, given the performance of gold rates.SBI Gold ETF, Kotak Gold ETF, INVESCO India Gold ETF, and others are some of India’s most popular gold ETFs.

To be more technical, gold ETFs invest your money in 99.5 percent pure gold, with approximately 90% of your investment money going into actual gold and the balance going into debt instruments which is one of the benefits of gold investment.

Gold Savings Funds

Gold Fund of Funds, commonly referred to as Gold Savings Funds, is mutual funds that only invest in gold exchange-traded funds (ETFs). The advantage is that investors do not need to have a DEMAT account, making it a little easier than investing in Gold ETFs. If you’re a novice investor, gold saving funds are a safe pick because you don’t have to worry about watching your investment’s success, and it’s also a systematic investment approach.

Gold in its Purest Form

The oldest technique of creating a gold investment is to buy actual gold. So whenever you purchase gold, you are essentially making a gold investment. But, because we’re talking about gold as an investment, there are two methods to do so: jewellery and bars & coins.

Stocks in Gold Mining

Investing in gold mining stocks is comparable to investing in the stock market, except that gold mining stocks are associated with gold mining firms. Gold rates largely determine the performance of these equities, but additional elements to examine include production costs, good management, and hedging operations, among others.

Jewellery Made of Gold

Gold jewellery is readily available from any jeweller, and current gold rates solely determine the return rates. This is one of the easiest ways to invest in gold today.

Gold Mutual Funds that are Invested in Stocks

The company that provides equity-based gold funds invests your money in firms involved in gold mining and extraction or companies in charge of gold marketing. Apart from gold rates, the systematic approach and expert administration of money are critical here, as they affect the performance of these organizations.

Coins and Gold Bars

Although gold bars and coins are similar to jewellery, they are distinguished because they are produced of pure gold and do not include any manufacturing costs. Therefore, if you want to invest in genuine gold, invest in coins and gold bars will always be more profitable than jewellery. On the other hand, gold jewellery returns are never lucrative due to the making charges.

Investments in Gold are Subject to Taxes

A wealth tax of 1% of the whole investment is applied on investments of more than 30 lakh rupees. Physical gold and gold ETFs are subject to a 20% capital tax.

Epilogue

Gold has been a part of history for over 3000 years and will not disappear for the same period of time in the future, nor has its value ever fallen to zero. When a financial catastrophe hits the economy, gold will be the last thing standing as a shield. Overall, we want to express that if you want to invest in gold today but are hesitant to do so for various reasons, we hope that the information presented above has swayed your opinion in the correct direction. Finally, remember to get financial guidance from your financial counsellor before making any financial investment.

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