Financial investment in today’s time is not only done by the experts but also by laymen population who wants to multiply their savings rather letting it just stay as it is for years. But the problem that the latter group face is the lack of knowledge and we all would agree to it that financial investments are not everyone’s cup of tea. But that should not mean that people not having the desired information cannot make such investments.

Technically speaking yes but that does not mean that you cannot even start and today, we are going to talk about one such investment method that everybody can try their hands on and have been in existence even before language was developed. Today we are going to discuss gold investments and precisely speaking, we will focus on the reasons why gold investments are relevant in 2021. It’s not like that the reasons mentioned below are relevant only in the context of 2021, instead, some of them have been the major reason for investing in gold for quite a long time. After we will be done with this, we will even talk about the various methods through anybody can make the gold investment. So, without any further delay let us get started with the discussion.

Hedge Against Inflation

Let us understand this one step by step starting with the meaning of an Inflation Hedge. Simply put an Inflation hedge is anything that retains its value even at the time of inflation. With the investment point of view, I mind, all you would want from your investment is to hold its value at all times including even the time of inflation.

According to the general trend, hard assets prove to be a great hedge against inflation and these hard assets include precious stones, oil and precious metals like gold and silver. Let us look at past performance of gold rates in Chennai to delve in and understand how gold a hedge against inflation is. Past values show that during the 20th century the gold rates in Chennai rose less than even 0.5% per year which indicates that the value of gold rate remained almost similar during an entire century. So, one can rely on gold investment in 2021 for a hedge against inflation.

Tangible Resource

Physical gold is tangible. It remains unaffected by accidents like fire and flood. Neither does it need any further investments to be kept safe or for maintenance. Plus, it is even safe from digital security threats from which online investment method are not safe i.e. gold is unreachable from both hackers and disaster. Not only this, gold is helpful even in the situation of commodity crisis.

Lower Risk and Wealth Creation

Many families in India buy gold for the purpose of making their family wealth so that it can be used at the time of crisis. Even if a situation of crisis doesn’t arise, the family gold can serve as a legacy for the future generations. Now, one of the alternatives that anyone would have to build their savings is to save up the cash directly but the problem with this way of saving is that it includes a higher risk of theft because keeping it safe is a difficult task while at the same time, if gold of equivalent value is bought for the savings, then it can be stored safely even in a locker of the house.

Well you can decide for this for yourself easily, let us assume that you have made a saving of rupees 2 Lakhs from your income over the period of last 3 years and you have collected in the amount in 2000 rupees’ currency notes while on the other hand, keeping in mind today’s gold rate, if you would have bought physical gold or gold funds of the equivalent value, then you can choose for yourself which way it would include lower risk to store safely.

A very popular instance from the past when gold investments involved lower risk is during 8th November 2016 demonetization. People who had their savings invested in gold didn’t have to face any inconvenience while the people with cash savings were waiting in queues every day with their heels over head.

Liquidity

One of the best conveniences that investors enjoy when investing in gold is its easy and quick liquidity which proves to be very useful at the time of emergencies and financial crisis. Let us understand more of this with the help of making a comparison to a real estate. Selling a real estate property for cash is not very easy especially when you need the cash immediately and at times when immediate cash is required and the owner does not even have any other option, then he might even have to sell it at lower prices but if investments are made in gold, then it can be traded in for cash easily without bearing any loss because the prices are set solely by the current gold prices.

Gold Investments is not a Rocket Science

One of the bitter truths about most of the financial investments is that they require the investors to have some pre-knowledge in order to make profitable returns and therefore, a lot of people refrain from making any financial investment. But gold investments do not require any pre-knowledge, no special skills, no investors bent of mind and therefore, it becomes suitable for those who want to take their first step into the world of investment.

Another aspect of gold investments is that determining the performance of gold returns is not very difficult as it is only dependent upon the gold prices. What this means is that the investors need to be much less worried about their investment and just have to check for today’s gold rate and that’s all.

Portfolio Diversification

An investment portfolio is the entire collection of different investments made by an individual. According to the market experts, some of the best investment portfolios are the ones that include investments made in a mixed manner and not where the total investments are isolated into a single sector or two. Some of the common investment sectors include mutual funds, share market, real estate and gold. As discussed above, out of all these entities, only gold is the one whose value remains unaffected by the market fluctuation.

The reason that market expert put forward for diverse investment portfolios to be better is that even if one of the sectors of investment faces any crisis, then other investments can provide you with the hedge against this crisis and gold serves best to be a hedge in these cases because of its stable values. Throughout the entire history, gold has always held its value and never has dropped to zero and thus, investing in gold is one of the best ways to diversify your investment portfolio while reducing the risk involved with other investments as it is not closely related to the market performance.

Demand and Supply are not Tuned in

The supply of gold in the global is market is limited because the output from the gold mining has been on a low since the 1990s while the demand of gold is not going anywhere, in fact, in countries like India where it forms a big part of culture and is offered as a gift representing a symbol of blessings and good omen. And it need not be explained that whenever demand and supply of a commodity are imbalanced in such a manner, its prices go high.

How can you Invest in Gold?

Gold investments can be made in multiple ways besides physical gold. Details about all the methods are mentioned below:

Gold ETF

ETF stands for Exchange traded funds and Investing in Gold ETF is investing in the funds that invest your money in the physical gold. Well, to be technically precise, the investments are made 90% into physical gold and 20% into debt instruments and the physical gold investments are made in 99.5% pure gold. since we are talking of these technicalities, then without taking any more time let us discuss the prerequisites that are required to invest into gold ETF which includes a DEMAT account, trading account, and 0.25%-0.5% brokerage fees.

Let’s face it that investing into physical gold is never profitable until done for a longer period of time and if you want some profitable returns out of your investment, then today’s gold rate suggests that gold ETF would be one of the better ways of investing into gold.

Gold Fund of Fund

Carrying the hierarchy a level up, gold fund of fund invests your money in gold ETF. Basically, they are mutual funds that invest in gold ETFs. A major attraction that it offers is that the investor is not required to hold a DEMAT account for investing in the gold fund of fund. As we mentioned above that gold investments are even suitable for amateurs, the systematic management of gold fund of the fund is just a proof to that because new investors can easily invest in them without having to worry about the complexities.

Gold Mining Stocks

Gold mining stocks are the stock market of gold where the investments are made in the stocks of gold mining companies. There are over 300 such companies in India that are listed under the gold mining sector of India.

Equity-Based Gold Fund

Equity-based gold funds are to gold mining stocks that gold fund of fund is to gold ETF i.e. equity-based gold fund are the investments that are made into stocks of companies connected to mining and extraction of gold but the investments are not made directly by you but they go through the fund house in between and therefore, the performance determination formula in this case even includes the performance of the fund house that invested your money.

Even though it has been mentioned quite a few times that gold investments are worry free and even if the example of gold rates in Chennai from above that shows that gold values remain unaffected in a negative manner even for period of a century didn’t convince you of the low-risk nature of gold investment, then equity-based funds would be suitable for you to enter into the world of gold investments.

The Right Time to Invest Gold

In this section we will talk about, what are factors that would help you to decide what is the right time to invest in gold besides the major today’s gold rate factor. Let us get into it:

Gold to Silver Ratio

Gold to Silver ratio is defined as the number of ounces of silver required to buy a single ounce of gold. Logically speaking, a lower value of this ratio would convert to lower the price of gold and vice versa. Now, how does this help the investors is that investing in gold is the right idea when the value of this ratio is low.

Compare Gold Prices Over Time

This step might require a bit of effort from your side but remember whose money is talking about in the first place. All you have to do is to compare the prices of gold over past few years and check for the patterns it shows like which is the time of the year when the prices of gold are lowest and then make your decision for when to invest in gold.

Conclusion

Gold has been the part of history for over 3000 years now and is not going anywhere for the similar amount of time in future and neither has the value of gold dropped to zero ever. Gold will the last one standing as a shield in the front of when a financial crisis will attack the economy. All in all, what we want to convey is that if you want to invest in gold but still holding back yourself from doing it due to some reasons, then we hope that whatever we discussed above would have changed your mind definitely to the right side. And one last tip, before making any financial investment, doesn’t forget to take the advice from your financial advisor.