Buying gold today- Do it for the right reasons!
It’s gold buying season again. On the auspicious day of Akshay Trithya, many Indians across the world go out to buy bullion i.e. gold & silver. This is a practice which has been going on for ages. Gold & silver have been giving fantastic returns in the last few years. This has only added to the gold & silver buying frenzy. How far this frenzy will last is anyone’s guess, but we at Fpguru.com are not suggesting you not to buy bullion. We are only sharing with you the right reasons for buying it.
Not for speculation but for the long term.
Don’t buy for gold & silver to make a quick buck. Just because you keep hearing that someone minted money in a gold or silver deal within 3-6 months, doesn’t mean you can too. Also as far is speculative trading is concerned, you keep hearing the success stories never the failures.
If you are interested in an investment instrument which offers safety along with liquidity & provides a hedge against inflation then no doubt gold is the product for you. If you aspire for moderate returns over a longer term with some risk taken, then silver it is for you. Do not invest in these if your investment time horizon is less than 3 years.
Diversification
You may opt for bullion to diversify your asset portfolio. Diversification is a must for successful investments. If you have a large portfolio consisting of various equity, debt & liquid instruments, allocating bullion especially gold to the mix adds some safety to asset allocation. This however may compromise the long term returns. Ideally gold should not form more than 10% of your portfolio. The same applies to silver. However if you want to invest in both, then a maximum of 15% should be in your portfolio.
Not for personal use
If you are buying gold this season to wear it i.e. jewellery, then you are not investing in gold but buying it as a commodity. No doubt it still has a value attached to it, but you will not be booking a profit on it if gold prices rise dramatically. This is because you bought it as an accessory not investment. You will only sell it as a last resort when all other sources have been used up. Same applies to silver.
Do buy it for child wedding goals.
Weddings are big in India. Grand parties, elaborate rituals, rich food, expensive dresses & jewellery are seen all around. Personally as a financial planner I have seen that in the Indian financial planning scenario, wedding is a big goal. This is something which is part of our culture. If you have started saving up for your child’s wedding, then regular investment in bullion can form a part of that preparation. Especially in case of daughter’s wedding this strategy will help a lot.
If you have more than 10 years for this goal, along with Equity SIP’s, you may buy bullion at every major dip. This is in case of physical bullion. If you opt for Gold ETF’s & E-silver then it becomes easier. Just start a SIP or regular monthly investment in them. It will be affordable & will fit into your budget as small amounts will be bought regularly instead of a large purchase.
If you keep the above points in mind, you will not only ensure that this auspicious day is successful for you but also your future life goals. On this auspicious day, take the first step to your financial freedom!
The article has been written by Jai Adiani. The writer is the founder of Fpguru.com
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Comments
Hi Curie,
Thanks for the feedback!! We truly appreciate it. We will be coming up on an article on Gold ETF soon. Will keep you posted for the same.
Regards,
Jai
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