Due to several influencing factors such as high liquidity, diversification, and inflation-beating capacity, gold is considered as one of the most preferred investments in India. Though there are phases when markets witness a fall in gold prices, it won’t last for long, and always makes a strong comeback.
We recently had a great conversation with the world-famous Business TURNAROUND Specialist – The Value ACCELERATOR Hirav Shah about the prospects of investing in Gold. He shared some valuable inputs about what are the options to invest in the Gold industry and what are the advantages of investing in Gold.
Table of Contents
Investing in Gold Industry
1. Why Should You Invest in Gold?
As per Hirav Shah, safety, liquidity, and returns are the three criteria most risk-averse investors look for before making any investment. While gold meets the first two criteria without any hiccups, it doesn’t perform poorly at the last one either. Here is why you should invest in gold:
a. Investing in gold is worthwhile because it is an inflation-beating investment. Over time, the return on gold investment has been in line with the rate of inflation.
b. Gold has an inverse relation with equity investments. For example, if the equity markets start going down, gold would perform well. Considering gold as an investment option in your investment portfolio will be a buffer to the overall volatility of your portfolio.
2. Investing in Gold Industry : How to
The ‘golden question’ here is – how does one invest in gold? Hirav Shah reveals that traditionally, it was by buying physical gold in the form of coins, bullions, artifacts, or jewelry. However, there are newer forms of gold investments nowadays, such as gold ETFs (exchange-traded funds) and gold funds.
Gold ETFs are similar to buying an equivalent sum of physical gold, but without the hassles of having to store the physical gold. Hence, there is no risk of theft/burglary as the gold is stored in Demat (paper) form. Gold funds involve investing in gold mining companies.
3. Investing in Gold Industry:Gold Funds
Hirav Shah elaborates that by investing in gold funds, you invest in stocks of companies operating in gold and gold-related activities. Gold mutual funds include silver, platinum, and other metals in their investment basket. A mutual fund manager on behalf of an asset management company manages the gold fund, unlike gold ETFs.
They make use of the fundamental trading analysis to buy and sell stocks to maximize returns for investors. Returns from gold funds depend on market conditions to an extent.
There are a lot of companies that offer you ETF type stocks, and it is best to list them out, and then do a little research on every single one, to discover the best company to invest in. Have a look at different financial websites talking about the company, and also research their ETF’s. Go online for their ticker symbol that they used to trade their stock to get the final results on the investment. The main things to research are how the stock(s) performed in the past, how long the EFT has been in existence, and exactly how much it’ll cost you to acquire the stock. Nevertheless, if you are having difficulty understanding the process, get guidance from an investment counselor for help. Once you’ve established the ideal stock to buy, next decide when the best period is to buy the stock. Find more information online to get the best website that will track this stock to determine the best timeframe. Have patience, and the point in time will come for you to invest your funds in gold stocks.
Gold mutual funds eliminate the risk of returns considerably by distributing investments over a wide range of investment options. In other words, mutual funds work on the principle of diversifying, i.e., not putting all eggs in one basket. Investors need to weigh their risk appetite and goals before choosing such a mutual fund.
Investing in Gold Industry- FAQs
Is investing in the gold industry a wise decision?
Answer: Investing in the gold industry is often considered a safe haven during economic uncertainties, providing stability and hedging against inflation.
What are the different ways to invest in the gold industry?
Answer: Investors can invest in the gold industry through various avenues such as physical gold, gold mining stocks, gold ETFs, and gold futures contracts.
What factors influence the price of gold?
Answer: Several factors influence the price of gold, including supply and demand dynamics, geopolitical tensions, central bank policies, currency fluctuations, and investor sentiment.
How can I mitigate risks when investing in the gold industry?
Answer: Diversifying your investment portfolio, conducting thorough research, staying informed about market trends, and consulting with financial advisors can help mitigate risks associated with investing in the gold industry.
How do I start investing in the gold industry?
Answer: To begin investing in the gold industry, consider your investment goals, research various investment options such as physical gold, gold mining stocks, ETFs, and futures contracts, and consult with financial experts for guidance tailored to your needs.
What are the advantages of investing in the gold industry?
Answer: Investing in the gold industry offers benefits such as portfolio diversification, a hedge against inflation and economic uncertainties, and potential for long-term capital appreciation.
What are the steps to effectively manage gold investments?
Answer: To manage gold investments effectively, regularly monitor market trends and gold prices, rebalance your portfolio as needed, stay informed about geopolitical and economic developments, and consider employing risk management strategies such as stop-loss orders.
How can I maximize returns when investing in the gold industry?
Answer: To maximize returns, consider a balanced approach to investing in the gold industry, diversify your portfolio across different gold investment vehicles, and maintain a long-term perspective while staying informed about market dynamics and trends.
Final Thought
Based on the SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis, which is a framework for identifying and analyzing the internal (strengths, weakness) and external (opportunities, threats) factors that can have an impact on the viability of a project, product, place or person,
Hirav Shah concludes that all investments have their own set of pros and cons. Investing in physical gold needs safety and security to preserve the same from theft. Investing in gold comes with a bunch of disadvantages; the other viable investment option that one can consider is mutual funds. They are also more tax-efficient as compared to traditional investments.
