Most people prefer to buy and invest in gold irrespective of their age and income as it becomes more lucrative in times of any catastrophe or emergency as it is regarded one of the safest assets for investment and one of the finest prevarication tools against inflation. However, just buying or investing in gold without taking other factors into consideration makes little sense. There are certain adverse situations one might face like getting duped especially in case of buying gold jewellery — or may end of buying gold at extravagant prices, or there may be some purity issue.
Some of the major points to consider before investing in gold are mentioned below.
- Investing in Digital Gold:
Despite the obsolete consumption-oriented requirements to capitalize in gold, it’s continuously better to do so in digital forms rather than making physical purchases, particularly in these crucial times of a global pandemic. Considered to be pure and free of storage concerns unlike physical gold investments Digital gold investments could create higher ROI apart from being much safer as they eradicate the risk of constricting and distribution of the dreaded virus that may arise while handling physical gold. Investment in physical gold might also include making charges and GST on making which might consume a lot of the actual returns.
While there are numerous distinguished compensations to investment in gold, there is a specific disadvantage as well. Gold does not ensure reliable profits for investors. While overtly traded companies harvest goods and services that consumers often find valued, gold genuinely does not have any significant yield. Often considered as a serious operational disadvantage comparative of other advantages classes because stocks recompense investors with bonds and dividends to yield interest payments, but gold does not naturally produce more gold. However, you only get benefited from gold as its price rises.
‘Paper gold’ or otherwise known as gold certificates can make the overall investment of gold a little simpler. However, investors should take a note that when they invest in a gold certificate, they literally don’t see or hold the gold. Your only evidence of having the gold is only in the paper. We all know that, today scammers are abundantly out in full force. Watch out for those who claim to be selling paper gold but seem relatively new on the scene. Before investing in gold certificates, it's important to verify the broker and ensure that they are trustworthy. With paper gold, there's also a significant chance that a dishonest company could sell the same gold multiple times and while going ‘cash in’ during an emergency, such tricks are exposed.
- Invest in Independent Gold Bonds:
While investing in the digital gold, it is better to invest in the RBI-backed Sovereign Gold Bonds rather than gold mutual funds and gold ETFs. Sovereign Gold Bonds can assure approximately 2.5% p.a. return over the actual gold price. Not to mention that SGBs are also more tax-efficient as there is no principal gains tax upon recovery although the interest income is taxed according to the provisions of the I-T Act. Acquiring SGBs online during the issuance periods often attracts an additional discount too while they could be purchased throughout the year from the secondary markets. The only point of contemplation could be the fact that SGBs involve a maturity period of eight years while these bonds could be discharged after the fifth year onwards, subject to certain terms and conditions.
- Check hallmark and purity:
Before planning to buy any physical gold such as jewellery, bars or coins, people should take some precautions as well. Purchasing gold from lesser-known and unbranded jewellers can cost you extremely as you can never be sure of the purity of the gold sold by them. To ensure the purity of gold and apt making charges, check for Hallmarked jewellery as they ascertain the purity of the gold.