Gold is always a safe option for investors and there have been lots of positives about investment in gold but do all those hold true in the current scenario? What should be your ideal allocation to gold? What are the major factor that attracts investment in gold? What would you opt for if you have an investment option as good as gold? Let me answer all these questions.
Gold is always considered to be a safe option for investors. The yellow metal has given a lump sum profits in the past 4 years. Year 2008 witnessed a sudden revolution in the gold prices owing to the economic recession. On an average, the metal has given around 15% returns in the past 2 years and even more returns in the year 2008 and 2009. There have been lots of positives about investment in gold. However, all these information do not hold true in the current scenario. If you are trying to allocate more funds to your existing gold investments, it is time to sit back and think.
First Time Investor
If you are investing in gold for the first time, then you need not wait for anything. You can straight away make investments in gold either through physical form or gold ETF. ( Check out my articles on Best Gold ETF’s ) Gold is still a safer fund when compared to other funds in the market. However, that does not mean you can put 100% of your money in Gold funds.
Ideal Allocation in Gold
It is highly recommended for the first time investors to invest in gold. It is recommended to diversify a maximum of 15% of your funds towards gold accumulation and not more than that. Gold investments are purely meant to have a proper diversification of your funds. There are several other funds, which can give better returns in the existing scenario. If you plan to pull out all the funds from equity, debt and mutual funds to invest in gold, then it might prove to be an expensive mistake in the long run.
3 Reasons To Invest In Gold
The yellow metal still shines bright. Expecting the Eurozone crisis and the US fiscal cliff, people are ready to make fresh investments in Gold. If you would like to invest a minimal amount in gold, there are several reasons to do so.
- Gold investment acts as a good diversification fund. When all other funds fail to perform, gold can contribute solid returns to your financial kitty.
- It acts as a better tool to hedge against the inflation and to deal with uncertainties in the economy.
- Third and final reason is that gold prices seldom come down or at least will remain in its existing price in the long run. Even if the prices come down, they will move up the ladder as fast as possible and will recover the loss. It will definitely not bite your fingers and pocket like equity.
Alternative Investment Option as Good as Gold
Silver funds are expected to give better returns in the year 2013. Silver as a commodity has a strong demand from industries too. The prices did not rally too much for the silver in the past couple of years compared to Gold. Hence, an upbeat demand from industries for the commodity is expected to trigger a fresh rally in silver prices. Now you have an option to diversify your funds to Silver ETFs too.
Final Thoughts
So finally the question to you is do you think it is right time to invest more in gold or you prefer Silver over Gold? Share your views in comments below.
According to me, investment in gold is better than equity/mutual funds etc.In equity there are more turbulance,while gold have less & steady rise.When we require the fund immediatly,we can sell the gold & get fund within a day.
Regards.
Ravindra Purohit
Ravindra, selling physical gold is not as easy as it sounds and at times you don’t even get the right price that gold trades when you try to sell locally and so ideally if you are not planning to invest in more than few years, gold should be invested through ETFs only. Check out http://shabbir.in/gold-or-gold-etf/
DEAR SHABBIR,
I THINK IT IS THE BETTER TIME TO INVEST IN GOLD ,IT WOULD BE HIKE AFTER SOME TIME. WE SHOULD INVEST STEP BY STEP
I prefer to invest technically and so the dip in gold will be followed by formation of W and consolidation and breakout above 2600 is what I would prefer to invest in gold. If it cracks 2400, I am not into investing in Gold.
good article
but with the recent hikes in the import duty
and the impact of the demand of gold on the Indian economy ( fiscal deficit)
would it be good to invest in gold?
I am not asking in terms of returns or risk profile
but rather on helping our economy and government reduce its fiscal deficit on imports
please share your thoughts
Thank you
I would say yes because if some commodity has not seen a decrease in demand in last 50 years and so these things would be temporary blip and nothing more.
You mentioned about Silver ETF but I guess there are no Silver ETF in India. Correct me if I am wrong.
Yusuf, you are correct to an extent that there is no Silver ETF’s in India but you can still invest in US Silver ETF using ICICIDirect’s international trading options upto Rs 1Crore.
Shabbir,
You have raised a hot topic – Gold ! I recently attended an investment conference in London on Gold based investments and it had very valuable and interesting discussions. Now this was coming directly from the horse’s mouth who are triggering big time gold demand and know in depth on sector’s dynamics. I believe, that Gold will have a bright future for times to come. The supply is very very limited and can not be increased rapidly even in several years to match the growing investment demand. On the contrary, the demand is growing crazily. Result – gold prices on fire. A very detailed article on Gold’s investment future is at http://insight.banyanfa.com/golden-path-of-gold/
Your point on silver requires a bit more attention as I haven’t found any many investment options to get into Silver (compared to gold).
Regards
BanyanFA
BanyanFA, great article on gold. I really liked it and so did tweet to my followers as well.
Now coming to the point of demand for silver you can read the news all over like this. It is one of those metal that is being used in many industries like Cars, Micro Chips and so demand is growing all the time and that was my view.