Golden Portfolio: Know different ways of investing in gold and risks involved

By: |
August 11, 2020 7:26 PM

Buying Gold is considered as a prized investment due to excellent liquidity, intrinsic value and ability to protect against inflation and currency devaluation.

gold, gold investments, physical gold, Gold bars, Numismatic Gold coins, gold jewellery, paper gold, Gold instruments, Gold ETF, Gold Mutual Funds, Sovereign Gold Bond, digital goldGold is also known as a safe haven as it gives high returns when economies and markets falter.

One of the oldest investment avenues is gold. Buying yellow metal is considered as a prized investment due to excellent liquidity, intrinsic value and ability to protect against inflation and currency devaluation. Gold is also known as a safe haven as it gives high returns when economies and markets falter.

With a strong and sustained rally, gold is breaking records almost every day, creating high interest among investors.

Here are the different ways of investing in gold and the risks associated:

Gold bars and coins

Gold bars and coins are part of bullion gold, investment value of which is determined by the value of its physical gold content. It’s a form of investment in physical gold that gives ownership and possession of the gold to the investors.

Risk: One of the risks involved is impurity in gold. Another problem involved with investment in physical gold is keeping it safe against the risks of theft, burglary, house breaking etc. Because of such risks, the investors need to make recurring expenses to hire lockers, buy insurance etc to ensure safety of the gold possession.

Numismatic Gold coins and collectibles

In some of the prosperous ancient societies, gold coins were in circulation as currency. Investments in such collector coins or numismatic coins do not qualify as investment in bullion coins, but are similar to investments in art and require additional expertise from investors. Based on factors such as scarcity or design, such coins and collectibles have an additional value beyond the value of their precious metals content.

Risk: Apart from the risks of theft, burglary, house breaking etc, it is also difficult to assess the genuineness and antique value of such coins and collectibles.

Gold jewellery

Buying jewellery is one of the most popular investment avenues in India, resulting in much higher retail demand for gold in the country in comparison to institutional investments. Along with gold content, the value of jewellery also involves manufacturing cost, which is quite significant and may vary from jeweller to jeweller. It provides higher consumer satisfaction compared to other forms of gold investments.

Risk: Apart from the purity and safety risk, investors lose the manufacturing cost at the time of resale.

Gold instruments

Gold instruments or paper gold are Managed Gold products where the gold is stored in professional vaults on behalf of customers. Some of the popular gold instruments in India are Gold ETF, Gold MF schemes, Sovereign Gold Bond, digital Gold etc, where the investors don’t get possession of physical gold, but get the outright ownership of gold and exposure to its price. So, investors save on recurring expenses needed to ensure safety of gold.

Risk: Investors may lose money in case the issuer of a gold instrument issues the instrument without investing in gold. So, before investing, the investors should ensure genuineness and credit worthiness of the issuer.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Faceless appeals for direct tax cases launched
2Income Tax Department launches faceless appeals system
3Govt operationalises ‘Faceless Income Tax Appeals’ system