Investing in property is completely goal-based planning and required a plan before investing, but investing in gold is very easy compared to investing in real-estate. In this post, we will see the advantages and disadvantages of investing in gold. So, let's begin.
Advantages of Investing in Gold
Gold holds a lot of importance in Indian culture but we will not talk of emotions here. Financial investment is a matter Mind and a person can't see it through emotions. Let us have a look at all the practical reasons or advantages that make gold a suitable investment medium over other options.
Simple and Easy to Liquidate
One of the major reasons for investing in gold is that you can consider it as a backup if in case you need it in future and gold is very easy to liquidate. In case you need to liquidate your gold in case of emergency, you just have to sell it to the buyer you prefer. There are so many buyers ready to buy the gold at anytime. But keep in mind that the return rate may not be exactly what you expect, instead, it is opposite especially in the case of physical gold. In case of physical gold, you get less than what you invest and you may face loss.
Proven Hedge Against Inflation
The gold provides a strong security against inflation. Gold rates are almost unaffected from inflation and therefore, you do not have to face a loss when the inflation hits the economy and if the currency rates go down in the global market. Now, as the value of Rupee has not been performing well in 2021, therefore, investing in gold in FY 2021 is not a bad idea at all.
Wealth Creation
We all consider Gold as a precious metal. As mentioned earlier, gold is very special in Indian household and is considered as a wealth of the family. The gold jewels are given by one generation to the other generation in a legacy.
Tangible Resource
Buying gold is easier than buying real estate or investing in Stock Market. It is a safe investment option for the people who are willing to start investing and looking for a very less risky option of investment.
Drawbacks of Investing in Gold
Apart from the advantages of investing in Gold, one must consider the drawbacks of it because you don’t only buy the pros, you buy the cons too and thus, you should know what are the downsides you will face by investing in gold in 2021? Let’s have a look:
Poor Returns on Physical gold
Rates of return of physical gold are never that much profitable if you invest in the gold jewelry/physical gold. The reason behind that is the price of jewelry does not include only gold rates but it also includes the making charges, and this is just a half story of gold price's determination. But, at the time of selling the gold, the story is completely different, the making charges are not considered and you get the money only for the pure gold based on the gold rates of that day. For example; if the gold rate in Mumbai during December 2015 was 27000 Rs for 10 grams of 24 karat gold and assume that you bought a gold necklace of 20 grams for about 60,000 Rs which include the making charges too. Now, due to some reason you want to sell it and you go to a shop who quotes the price only for the gold necklace contains and not for the stones it has or the copper which weighs it down to only 13 grams and the cost of 13 grams of pure gold in 2021 is only 40000 Rs in 2021. In such case, it is definitely a loss deal for you and thus, poor return rates are one of the downsides to keep in mind while investing in physical gold.
Safety Issues with Storing Physical Gold
Physical gold has the same security threats as cash in the house. It is easy to steal just like cash or any other precious thing in our home and thus, the investors have to keep the gold completely safe. Although investing in some other form of gold investment like gold ETF or fund of fund can be considered as a better way to go but this way too, you are not totally secure. You may have to face cyber security threats and you will be vulnerable to internet security attacks. But, the difference is that this security is threat is equal for everyone and even other investments too like mutual funds etc.
Not a Source of Steady Income
If you are looking for a source of income for your post-retirement life or for your children, then the gold investment is not made for this specific purpose as you invest in gold once and you sell the gold once, there is no constant profit or income from gold. So, Gold probably can be considered as one of the best hard assets but when it comes to investing for a regular income, it fails.
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