Gold can play an important role in a diversified investment portfolio. It is generally regarded as a safe-haven asset and, over the long term, has the potential to beat inflation. Usually, we see an inverse relationship with equities; when stock markets decline, gold prices often rise and vice versa. A common guideline is to allocate 10–15% of an investment portfolio to gold. There are various ways to invest in gold
- Physical Gold
- This is the traditional method of investing in gold, typically in the form of bars, coins, or jewellery (mainly for utility).
- Challenges include security, storage, and associated costs such as making charges, wastage and taxes.
- Jewellery, in particular, is not considered an efficient investment due to these additional costs.
- Gold Exchange-Traded Funds (ETFs)
- Gold ETFs can be bought in units generally equivalent to 1 gm of gold
- Gold ETFs track the price of gold and are traded on stock exchanges.
- There is no physical gold involved, which makes it easier to invest without any making charges, wastage etc.
- Investing in Gold ETFs requires a Demat Account
- Gold Mutual Funds
- These funds invest in gold ETFs, gold mining companies, and other gold-related assets.
- There is no physical gold involved, which makes it easier to invest.
- Gold MF carry a little higher cost compared to Gold ETFs but provides higher liquidity.
- Gold MF do not need a demat account and you can invest as low as ₹ 500/month.
