Why Choose Gold As An Investment/Savings?
We all know that gold is the heavenly investment with stable returns & it’s known for its ability to bounce back in the bad times when all the assets decrease in value.
Yet we hesitate to invest in gold because of all the other enticing options that offer high returns but we forget that they come with the same risk too.
Today, in this blog we will compare all the different options in detail because when it comes to your hard-earned money we understand you can’t afford to lose money.
Let us compare gold with all the other sorts of investment options out there & figure out which kind of investment may suit you.
In this blog, we will not be biased & also show you the limitations of gold too. So, Stay tuned till the end.
Gold Vs Rupee
In today's world, inflation is no secret as everybody knows that the value of currency decreases over time whereas the value of gold appreciates which results in a winning condition for gold in gold vs real interest rates.
Secondly, if you have cash in your wallet then you are more likely to spend it on things like fancy expensive meals or clothes but if you have gold you won’t do this because of the extra effort that it takes to sell it. So in gold vs money, gold wins.
Gold Vs FD
The highest rate of Fixed Deposit for 5 to 10 years (FD) could be 5%. That compared to inflation is nothing at all. Further if we deep dive into research then we will find that FD offers negative returns! In simple terms, inflation (rise in the general price level) rates are more than 5% which could be not covered by FD.
On the other hand, Fixed deposit accounts with any bank have a tenure of 5 to 10 years & if you redeem before that then they charge a penalty of premature redemption anywhere between 0.50% to 1% which further reduces the chances of FD beating the inflation.
Gold Vs Bonds
The most common misconception of all time is that you can’t lose money on bonds. Though this statement may be true for some AAA-rated bonds yet not true for all the bonds, as every bond issuer underwrites their assets in case of capital loss whereas gold is something you possess, though it’s not recommended to store it at home where there is a risk of it being lost/stolen.
Another thing to keep in mind before investing in bonds is the minimum investment amount which is generally Rs.10,000 & the lock-in period which is usually 8 years. Though early encashment may be allowed after 5 years as then it will be tradable on exchanges yet you may not get the best rates on early redemption.
On the flip side, some of you might think that gold is expensive but at least you can buy a fraction of it to cross the hurdle of the minimum investment amount, unlike bonds.
Thirdly not all the bonds beat the inflation & those who propose high-interest rates are generally unsecured bonds that do not bind to return your capital or interest in case of loss. Whereas, there is no such risk in gold obviously & it beats inflation by a significant margin.
Lastly, unlike investment in gold, the bond market offers a vast variety of bonds that require research similar to equity markets which we are going to cover next.
Gold Vs Equity
As mentioned above, unlike gold, equity markets do require a lot of research before investing as there are many things to consider even just before opening a Demat account with a broker, for example- AMC charges, Hidden Charges, Rate of brokerage to buy/sell &, etc. After all this, there are aspects like fundamental analysis, technical analysis, valuation, etc to be considered before becoming a shareholder of a company.
Seeing all these things, you may opt for mutual funds which are again subject to market risks & the funniest part about mutual funds is that they were meant to simplify your journey in equity markets but as there are so many of them out now, it’s a hassle choosing the best capital allocator which requires further research.
Thirdly, the mutual fund managers take a fee in terms of expense ratio to allocate your capital & other than that you will also have to look at exit load which is another hassle & a hammer on the returns at the time of redemption.
Here’s A Secret - According to some sources, there are many mutual funds with billions of dollars in assets under management that have lost all the money of their investors. Whereas gold is an example of true stability. So clearly in Volatility of Gold Vs Stock market or Share Market, gold wins in terms of having a good track record in all-weather.
Fun Fact - Gold and Stock have an inverse relationship so when the stock market falls; Gold price will be at its peak. Ask those people who had gold investments during the pandemic.
Good Reasons to use gold as an investment or savings
- It is an effective tool for hedging against inflation.
- You can make gold investments to diversify your portfolio because it can withstand stock market downturns.
- Gold is also an asset of high liquidity as you can buy and sell it easily.
- It is a low-risk investment as gold prices are stable compared to the stock market fluctuations and other commodities.
Now that we have covered why gold investment is good let’s be unbiased & also discuss its dark side too -
Why Gold Investment Is Bad - Let's Not Be Biased
We all know that there are always two sides to a single coin & the same goes for gold. It also has some limitations such as -
- It is difficult to find a trusted seller that sells 24k purity.
- It is even more difficult to store it where it doesn’t get damaged.
- Risk of it being lost/stolen.
- Investments in gold are difficult to track.
- The minimum investment amount entry barrier.
- Hassle to sell it & get its perfect price.
- Trusted Gold investment plans are hard to find in the market.
- Expensive due to middlemen commissions.
Wondering What’s The Solution?
Well fortunately we are living in the era of digitalization & with so much advancement in technology, DigiGold is revolutionizing the way we used to look at gold by solving all the limitations of Gold. In simple terms, you buy & store 24k pure Gold from the comfort of your home, that too with the lowest rates, as it cuts all middlemen commissions. How cool is that?
Well, we would say it’s a Fab thing because going to a store to buy Gold is so yesterday & what’s the point of going out unnecessarily in this pandemic situation, when you can get Gold delivered at your doorstep whenever you want. If you want to know more about DigiGold you may deep-dive here.
In conclusion, we are not against any investment options out there because if you have the time to research & a good risk appetite then other investment options may be ideal for you but before that, you must first save to invest, for that the Ultimately Easy, Trackable, Feasible savings option to participate in the growth that beats the inflation is DigiGold.