Most of us invest our money, but how we invest is different. We all have different investment options and preferences in investing and today we are going to discuss one such option, which is gold. We will take a look at gold, from the perspective of an Indian investor and understand that it is a good investment for normal investors like us.
First of all, gold has been one of the prominent investment options for many past decades, most parents and grandparents bought gold with their savings and sold or mortgaged it during a tough time. So Indians and gold have a history for ages, we also used to make and give gold ornaments for marriages and other functions. But the question now is, is gold a good investment option still? In this article, we will take a look at the advantages of investing in gold, the disadvantages of investing in gold, and other investments as compared to gold.
Advantages of investing in gold –
1. Simple and easy to liquidate – One of the best things about gold is you can liquidate it easily, you can sell it any day without any hassle. Unlike stocks which can be only sold at a particular time of day, also sometimes stocks can be hard to sell because there could be sometimes no demand for stocks, but you can find a seller for stocks instantly at any time.
2. Proven against inflation – Also gold has proved for decades that it is a good investment option, if you see the growth rate of gold it is quite good. Gold grew almost around 163% in price in the last 10 years which is quite a good return on investment, and surely enough to beat inflation.
3. Easy to invest in – Gold has feasibility in buying and selling and that’s one of the best qualities for an investment, you can easily go out there and buy gold in any karat you wish easily.
4. Safe from risks- Gold is free of many different risks, equity has a risk that the company may get delisted, or investments such as bonds would have the risk of default, but gold is free of such risk you buy and get it in your hand.
5. Always in demand- Other investments may have the risk that you would end up without buyers, but gold doesn’t have that disadvantage; you can sell gold at the market price any day.
1. Simple and easy to liquidate – One of the best things about gold is you can liquidate it easily, you can sell it any day without any hassle. Unlike stocks which can be only sold at a particular time of day, also sometimes stocks can be hard to sell because there could be sometimes no demand for stocks, but you can find a seller for stocks instantly at any time.
2. Proven against inflation – Also gold has proved for decades that it is a good investment option, if you see the growth rate of gold it is quite good. Gold grew almost around 163% in price in the last 10 years which is quite a good return on investment, and surely enough to beat inflation.
3. Easy to invest in – Gold has feasibility in buying and selling and that’s one of the best qualities for an investment, you can easily go out there and buy gold in any karat you wish easily.
4. Safe from risks- Gold is free of many different risks, equity has a risk that the company may get delisted, or investments such as bonds would have the risk of default, but gold is free of such risk you buy and get it in your hand.
5. Always in demand- Other investments may have the risk that you would end up without buyers, but gold doesn’t have that disadvantage; you can sell gold at the market price any day.
Disadvantages of investing in gold –
1. Safety issues in storing physical gold- Storing of gold is one of the many issues with investment in gold, it may open them to risks such as theft. And also a small amount of gold is easy to store, but when the amount is large then issues may be posed. The solution to this may be storing in digital format.
2. Problems in planning- So imagine the gold price is 50000, so how much should you buy every month to plan for retirement, to calculate that is tough? Right. Investment in gold may be a good option but one can’t plan or weigh their plans, so it is difficult to plan for long-term goals with investment in gold.
3. No source of income- If you see the advantage with other investments, they provide you with additional sources of income. Such as an investment in real estate would bring you to rent, an investment in equity would bring dividends in, but there’s no additional income coming with gold.
1. Safety issues in storing physical gold- Storing of gold is one of the many issues with investment in gold, it may open them to risks such as theft. And also a small amount of gold is easy to store, but when the amount is large then issues may be posed. The solution to this may be storing in digital format.
2. Problems in planning- So imagine the gold price is 50000, so how much should you buy every month to plan for retirement, to calculate that is tough? Right. Investment in gold may be a good option but one can’t plan or weigh their plans, so it is difficult to plan for long-term goals with investment in gold.
3. No source of income- If you see the advantage with other investments, they provide you with additional sources of income. Such as an investment in real estate would bring you to rent, an investment in equity would bring dividends in, but there’s no additional income coming with gold.
The new way to invest in gold –
With advancement in investment options, there are better ways to invest in gold. They are gold ETF, or you can even buy digital gold. There are equity and mutual fund options available to help you invest in gold, without physically buying it. This helps you fight the problem of storing physical gold. And it is a good option to keep your investment diversified.
Gold as compared to sensex and nifty for last 10 years-
Gold has outperformed sensex in 10 years, gold has appreciated around 134 (as of 2019), while sensex was at 130. While gold has performed better in this time frame, but overall nifty has a better CAGR then gold.
Conclusion – Overall gold is a great investment option but when compared to other It lacks a bit in high returns. It can be a good option if you want to diversify your investment but investing a major part of your income there wouldn’t be a great option.
With advancement in investment options, there are better ways to invest in gold. They are gold ETF, or you can even buy digital gold. There are equity and mutual fund options available to help you invest in gold, without physically buying it. This helps you fight the problem of storing physical gold. And it is a good option to keep your investment diversified.
Gold as compared to sensex and nifty for last 10 years-
Gold has outperformed sensex in 10 years, gold has appreciated around 134 (as of 2019), while sensex was at 130. While gold has performed better in this time frame, but overall nifty has a better CAGR then gold.
Conclusion – Overall gold is a great investment option but when compared to other It lacks a bit in high returns. It can be a good option if you want to diversify your investment but investing a major part of your income there wouldn’t be a great option.