InvestorQ : How should I invest in gold? Should I buy as gold coins, jeweller or gold bars?
Moii Chavate made post

How should I invest in gold? Should I buy as gold coins, jeweller or gold bars?

Sam Eswaran answered.
3 years ago

To begin with, there is a simple caveat. Gold cannot be classified along with other asset classes like equity, debt and real estate. Gold is, at best, a hedge against global uncertainty. Hence exposure to gold must be restricted to around 10-15% of the total portfolio value depending on the geopolitical situation. Don’t compare gold with other return generating investments like equity and debt. Gold has a different purpose in your portfolio altogether. That still brings us to the fundamental question; how do you invest in gold?

While buying gold bars and jewellery is the traditionally accepted form of buying gold, there are other more scientific forms of holding gold that are emerging. Sample a few of them…

A long term investor in gold can look at buying exchange traded funds on gold (Gold ETFs). These can be bought and sold like any stock in the market by paying basic transaction fee. They are liquid and track the price of gold very closely. It also saves you the hassles of storage, insurance, safekeeping etc.

Gold traders can look to buy futures in the commodity markets by paying a nominal margin. However, one needs to be conscious of the risks involved as gold futures are a leveraged product and just as profits can multiply, losses can also multiply.

The government has recently launched the Gold Bond scheme, where you can participate in the gold price movement and also earn annual interest of 2.50%. These bonds are fully guaranteed by the Government of India and are also traded on the exchanges. Such listing of these gold bonds happens after a gap of 6 months from the issue date.

Lastly, you can also participate in the Gold Demonetization Scheme, but that scheme is yet to take off in a big away.

In a nutshell, gold will continue to attract interest from buyers due to geopolitical uncertainty. The basic idea for investors is to purely look at gold exposure from the point of view of providing stability and in in-built insurance for your portfolio. Investors need to understand two things here. When we talk of gold investments we are not referring to your purchase of jewellery. We are referring to the purchase of gold as an investment. Seriously look at non-physical modes of holding gold like gold ETFs, digital gold, gold bonds etc. They are safer and a lot more convenient too.