“Gold and silver is money, everything else is credit.”- J.P. Morgan
These days, I’ve heard a lot about gold investment. Some people say, “Gold investment is not a good choice in India” or “Gold investment is worst.” “Gold is never old” is what others say, or “Gold investment is the best and passed the time test.” But some say, “in India Gold is no longer a good choice because mutual funds and PPF’ are launched.” We need to believe which one? How will we find out what gold investment is good and what is the future of gold on the Indian market?
For you to comprehend in this article the definition of gold investment opportunity in India, I kept this detailed but simple. You will get a good picture, as you read this, of where gold is from the point of view of investment.
Here we go,
Briefly, gold investment is not desirable, and gold is also not a bad investment. It’s not exactly an investment. Gold is a product/commodity only. Like any raw material, we buy for home use.
One thousand years ago, ten gold grams could buy you for your wedding a beautiful dress. Now you can buy a wedding dress for your 10 gm of gold. It will do the same for 1000 years in the future. Nothing more, nothing less. Nothing more.
If you do gold investment, you don’t spend, you just try to sustain inflation. In the end, you don’t spend it.
Here’s the explanation,
Of several household requirements such as water, wheat, rice, cotton, gold, etc. Gold is an object that cannot be lost, and it can always be preserved without any damage to its taste or work. For years you can store it; it takes less space and can always be exchanged
Therefore, if you have a lot of money and you don’t have any clues on what to do with it, just go for gold investment. If you live in a country without other investment methods, gold. You feel a recession risk, battle, inflation risk, and when you buy gold.
Yeah, the price fluctuates, but overall, gold investment retains its long-term value. Prices are not manipulated by the government; they are not regulated by a CEO and have no ‘lifetime’ like any other commodity.
The fact that the supply is small and that there is a high gold investment demand in times of market stress also gives gold another value. While gold prices increase, the market cannot pump more oil or prints more notes and mine gold in the way it can.
Gold Investment Advantages:
- Excellent option to keep inflation going.
- Provides greater returns during the crash and contraction of the economy.
- High cash, as it can be sold every day.
- Second best agreed on worldwide currency exchange form.
- Strong stable worldwide market.
If you want to raise your wealth, keep reading
We are all conscious that there is no real value in the printed money. You cannot eat, you can’t drink and you can’t make homes or cars with it. If we say tomorrow that all the paper money must be stopped and just the sum, we have had in our bank account we can get a whole new currency. Then you won’t make nice all that you named money in your pocket and locker (I know the government’s not doing anything like that, I hope so).
The currency we are using has meaning, however, since we all agree to use it as an exchange medium.
Take, for example, a wheat example. It has an intrinsic value, as chapatti, cookies and all sorts of savoury and nutritious foods can be made with it. The importance of wheat is because it is required by the people.
What about gold? For jewellery, electronics, medicine, and many other factors, industries need it. But this is the real reason why the price is high? Of course not. Gold cannot be manually extracted because it only comes from mines and is therefore scarce in this world.
You’re a gold merchant?
During crisis periods, people withdraw money from their shares and invest in alternative classes of investment, one of which is gold. We thus discover that gold has a lower bond correlation.
That means that gold price decreases or stays constant for years as the prices of shares increase. (Because most capital is pumped to shareholders and reciprocal funds). The price of gold jumps unexpectedly when the economy collapses.
This proves that the price of gold does not depend on its own use, but on external factors, or on natural requirements (intrinsic purpose). If you are interested in researching the potential price movement of gold, you must analyse all external factors, including stocks, inflation, government policy, world trade, etc.
You can rather make billions of dollars out of stock itself when you identify stock market crashes early.
Anyone who bought and sold gold at the beginning of 2000 got a good profit, but they had no idea how much gold they would get before investing. Because of many market crises, this was a pure luck.
Let’s play with some digits now!
I have made a detailed gold price/sensex analysis for the 1980-2020 period, and I have concluded that the Sensex returns above 15% (compounded) annually, whereas the gold returns were only 8.43% (compounded) annually for the same period.
Even the (www.gold.org) website has performed the study and testing over many periods and recommended that only approximately 3 – 9 percent of Gold is part of your portfolio.
The simple explanation is that you can earn a much better return by means of stocks or mutual funds if you are investing for a long time (5 to 7 years or more). On the other hand, you have a safer option to park your fund with a liquid mutual fund (which offers capital protection) if you wish to invest or park funds for a limited time (less than 5 years). Since the price of gold varies often wildly and, in a few years, when the cash is needed desperately, you can have to sell it for less.
India’s average inflation rate is about 6-8 percent a year, so gold is used only to beat inflation and diversify the portfolio in the event of crises. If you raise your gold investment, then you lack the ability to earn better returns by investing in other better sources of investment.
You have better options available if you do want an annualized return of 8.5%, including PPF, NPS (tax-free), fixed deposits, bonds, and so on where guarantee returns are offered. Or you have better options on the stock market if you want to play gold in the short term (which I do not recommend) by buying it.
The Indian economy is rising much faster than the American economy and any other economy in the world. This is the best time to invest in equity-related tools for this era of high growth. Or else, you would cost more than anything in the long run than Arrogance and lack of risk mindset.
Hope this information was helpful to you. I hope to see you soon again at Finbugs.com
Till then, happy investing!