Gold is a symbol of wealth and often get associated with status, richness and luxury. Investing in gold is not limited to buying jewelry or coin/bars, there are many other options available like ETFs, Gold Funds, Sovereign Gold Bond Fund, Gold Monetization Schemes etc.

Gold is the metal which can easily be traded in the market due to its unique features:

1. Value of gold

Today, where value of money gets lower due to inflation and other factors, gold value is increasing. This unique feature of gold makes it a valuable commodity. It’s surely a smart move to invest in gold through ETFs, mutual fund or bonds because gold has outperformed over other conservative asset classes. It’s not recommended to buy gold in a crisis but if you have invested in gold then it will help you to hedge your portfolio when a crisis happens.

2. Safe heaven

Gold is an asset class which gave highest returns whenever there was a stock market crisis or high inflation. Rather, gold has a negative or very low correlation with all other asset classes.

In India, people often buy gold on occasions like marriages, festivals etc. OR when its value is increasing, with an expectation to earn more returns.  But when it comes to investing in gold then there should be some specific reasons. Let’s understand these main reasons:

Reasons to invest in Gold

1. Hedging

Hedging means equalizing losses from other asset classes in the portfolio.  Investment in gold helps to hedge the portfolio or other investments from inflation and price volatility.

2. Safety

Gold is a safe option of investment which serve as an insurance in an uncertain event.

3. Diversification

Adding gold in your portfolio not only helps to hedge it but also gives benefit of diversification which helps to reduce the risk of portfolio.

How much One should invest in gold?

Having gold investment in ‘Good time’ is profitable, but that does not mean one should invest only in gold. Gold prices often moves with investors sentiments and have its own ups and downs. Also, gold investment is more for the purpose of hedging and diversification. Therefore, this investment should be limited to 10% of total portfolio subject to investor’s risk and time duration.

Gold investment options in India

1. Gold ETFs

Gold ETF is one of the safest and recommended option of investing in gold. One can invests in gold ETF through demat account and trading account as these ETFs are listed on the exchange. There are brokerage charges for trading.

2. Gold Mutual Funds

Gold mutual funds invests in different gold ETFs which are listed on stock market. If you do not have demat account but want to invest in gold ETFs then gold funds offered by mutual fund houses can be an option.  Investors can also do SIP in such gold funds.

3. Sovereign Gold Bonds

Sovereign gold bonds were introduced by the Government of India in 2015 under the Gold Monetization Scheme, to enable investors to invest in an asset class which is a substitute for physical gold. You can get all information about Sovereign Gold Bonds here.

4. Gold Monetization Scheme

Gold Monetization Scheme is the scheme which lets you earn interest from your idle gold (in any form) without selling it. This scheme addresses the physical gold held by households and institutions of the country. Under this scheme, customers can deposit gold in any physical form (like, coins, jewelry or bars) in the bank and can earn interest based on weight or as per value appreciation.

5. Gold Jewelry/Coins

This option is not  recommended as it carries maximum risk and need safe place to store. Also, buying and selling of jewelry involves charges and selling may go below the market price. Gold coins can be a better option as compared to jewelry but then again as physical asset you need a safe place to store it.