This Dhanteras, could Gold ETFs and soverign gold bonds be a better option for increasing your holding of the yellow metal.
This Dhanteras, could Gold ETFs and soverign gold bonds be a better option for increasing your holding of the yellow metal. Experts believe that these two modes could be a better alternative to buying physical gold as investment.
“Buying gold jewellery shouldn’t be confused with investing in gold. Increasing awareness on the drawbacks of physical gold as an investment option has made people switch to Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds – the smarter ways of investing in gold,” Chirag Mehta, Senior Fund Manager-Alternative Investments, Quantum AMC, said.
Mehta says that an investor in gold should weigh the potential returns. “Mathematically, Sovereign Gold Bonds may seem more rewarding than Gold ETFs. However, the potential to earn higher returns should be evaluated in the context of other important considerations. Liquidity is a key factor that should be considered while making any investment. Investors should be able to encash their holdings at any time without compromising on the value. Easy availability is another important consideration. The investment instrument should be easily available so that investors are able to deploy their funds without any delay. In these aspects, Gold ETFs are better than Sovereign Gold Bonds,” he said.
Mehta said if one is buying physical gold they should have limited exposure to the metal. “Gold is a safe haven asset, which makes it an effective portfolio diversifier. It’s thus prudent to allocate 10-15 percent of your portfolio investments to gold. Please consult your financial advisor before taking any asset allocation related decisions,” he said.
Vijay Jain, CEO and Director, ORRA Fine Jewellers says gold bonds are a good option for investors. “Buying physical gold or Sovereign Gold Bonds would largely depend on the end purpose of buying the previous metal. A large number of people look at enjoying gold in the form of jewellery and also collecting it over a period of time for important occasions such as their children’s wedding. Gold bonds are a very interesting option for people who are looking at it largely as a financial decision.”