Why shouldn’t you invest in Gold? Instead, invest in a gold fund

Buying gold is one of the oldest and most sought-after means of investment in India. Being one of the traditional ways of investing in India, it is continued even in modern days.

But is it really worth investing in Gold?

Gold as an asset class many roles in an investor’s portfolio. While Indian consumers not only consider gold as an investment but also consider it to be one of the signs of prosperity. However, as an asset, it has remained highly unproductive, unlike shares and/or bonds. A pile of gold bought today will remain the same over the years and will not really contribute to any kind of economic growth.

On the contrary, if the similar amount of money is invested in any business or any other economic activity, it is likely to generate actual wealth while growing large enough. Having said this, we believe some part of gold should always be a part of your portfolio in order to safeguard you from any macroeconomic shock but this gold should be invested more in the form of a fund rather than the actual gold commodity.

Following are the benefits you get as an investor should you invest in a gold fund:

  1. Start low – Like every other mutual fund you can start gold savings fund with as low as Rs 500 per month and accordingly multiply your contribution every month as per your financial flexibility While you do not get gold of equivalent value but units that are stored in a demat account or with the fund manager in your account.
  2. No worry of purity – Investing in gold by way of fund result in the highest degree of purity. It is technically impossible for a common individual to adjudge the purity of gold while buying from any retail outlets. However, in case of a fund, you don’t really have to bother of purity as it is invested in the purest form.
  3. No Queues – Given the transactions in a gold fund can be made anytime anywhere, you don’t really need to stand in the queue for your turn to come particularly during festivals.
    No Making charges – Even if you invest in gold coin or gold bar, it comes with a making charge. However, if you invest in gold fund there are no making charges thereby resulting in the better cost of acquisition.
  4. Safe – While real gold always carries the risk of theft, there are no theft or warehousing problems associated with paper gold.
  5. No deduction for selling – If you sell gold coin, bar or jewelry, the retailers or dealers deduct a margin towards making charges and wastage. This deduction is not applicable to gold fund and there is no deduction during redemption thus improving your profit.
  6. Cost averaging – In physical gold, investors typically tend to try and time the market based on their own judgment and ends up buying in bulk at a comparatively higher price. However, with a gold fund, an individual can also do disciplined investing with fewer units during rising markets and more units during the falling market. This enables an individual to average the cost of acquisition. Further, there is no need to actively tracking the market as in disciplined investing over the long term, an investor is likely to make profit irrespective of the investment time, price or quantity.

To recap, we believe a gold fund is very simple investment instruments and are very suitable for those who want to invest in a regular and disciplined manner on a long-term basis. Thus, this Akshaya Tritiya pledge to invest in gold through funds rather than physical hoarding and also contribute to India’s economic health. Should you need any assistance regarding investing in a Gold fund, feel free to drop in a line and we shall be glad to assist.


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