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India’s affair with Gold: Options other than Physical Gold

Selling physical gold is still a taboo in India. It is presumed that a family is going through tough financial times if they are selling gold. Gold is not the problem but the strong emotional attachment is. It’s high time we consider gold as an asset and not as an emotional possession. The larger crowd believes we can invest in gold only by possessing physical gold. It’s a long-gone fact that no longer holds true.

Here we lay the foundation of gold investment for you.

Broadly, you can invest in gold in the following forms-

1) Physical Gold (too boring, unless you are a fan of Bappi Lahiri)

2) Gold mutual funds

3) Gold ETF

4) Sovereign Gold Bonds

And to summarise the difference between all these options refer to the picture below. The advantages have been highlighted in green.

To sum up the gold series, gold is not an asset for wealth creation, to break the myth. History shows that there is capital appreciation but at a low CAGR of 8-9% over a period of 30-40 years. These returns are inflation-linked returns and hence not a wealth creation asset. Gold should be a part of the portfolio as a diversification strategy and not wealth creation, given this fact, people can hold not more than 10-12% of their overall net worth in gold.

Disclaimer: It is always advisable to consult from a registered investment advisor for your investments. This article is for education purposes only.


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