Widely read:
I want to invest in gold and silver. Is this the right time for this, since their prices have already gone up? If yes, what is the easiest way to do so?
- Mallik
You can invest in gold but I don't know if this will be the right time. Maybe, it was one year back. There are many ways of investing in gold, through jewellery, gold ETFs, fund of funds (FOFs) and Sovereign Gold Bonds (SGBs).
Of course, SGBs are the best option but they compromise on liquidity. SGBs give you 2.5 per cent additional interest over and above the appreciation in the gold price. All other options to invest in gold have overheads attached to them. In jewellery, making charges could be very significant, ETFs have expense ratio and brokerage cost attached to it. In fund of funds (FOFs), you have to pay a management fee of the FOF, in addition to the one charged by the underlying ETF.
So, that ways, when it comes to investing in gold, SGBs are a good option. The only problem is that they have a tenure of eight years and lack liquidity if anyone needs money in the interim. Otherwise, even the capital gains tax is exempt on their maturity.
You are probably thinking to invest in gold because it has gone up over the last one year. But that is a wrong reason to invest in it. It is not a good investment and should be considered as a store of value. It comes handy during a crisis as it never falls as dramatically as equity does. You may invest a small portion of your portfolio in gold for this purpose. Build it gradually.
This article was originally published on July 22, 2020.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
For grievances: [email protected]
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
