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Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - May 20, 2024Hindi
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I'm 31 years old and want to invest in gold as a part of diversification. Is it wise to invest in gold like our purchasing goldbars/biscuit or as a complete product like chain or necklace. Thanks in advance

Ans: Investing in gold can be a valuable addition to your portfolio for diversification and wealth preservation. Let's explore the pros and cons of investing in gold bars/biscuits versus gold jewelry.

Acknowledging the Need for Diversification
It's great to see your interest in diversifying your investment portfolio at a young age, reflecting your commitment to financial stability and growth.

I understand the importance of exploring different investment options like gold to hedge against economic uncertainties and inflation.

Evaluating Gold Investment Options
Gold Bars/Biscuits: Investing in physical gold in the form of bars or biscuits offers liquidity and ease of storage. You can buy and sell gold bars/biscuits easily through authorized dealers or bullion exchanges.
Gold Jewelry: While gold jewelry has aesthetic value, it may not be the most efficient form of investment due to additional costs like making charges and potential loss of value due to fashion trends or wear and tear.
Advantages of Gold Bars/Biscuits
Purity and Value: Gold bars/biscuits are typically of high purity and standard weight, making them easily tradable and recognizable in the market.
Investment Focus: Investing in gold bars/biscuits allows you to focus solely on the investment aspect without being influenced by aesthetic preferences or fashion trends.
Disadvantages of Gold Jewelry
Additional Costs: Gold jewelry incurs additional costs like making charges, which can reduce your overall returns compared to investing in gold bars/biscuits.
Subject to Wear and Tear: Jewelry is susceptible to wear and tear over time, which may affect its resale value and add to maintenance costs.

While both options offer exposure to the gold market, investing in gold bars/biscuits is generally more conducive to investment purposes due to their purity, liquidity, and ease of storage. However, it's essential to consider your personal preferences and financial goals when making investment decisions.

Evaluating SGBs and Gold Funds
Sovereign Gold Bonds (SGBs): SGBs are government-backed securities denominated in grams of gold. They offer the combined benefits of gold investment and fixed interest income.
Gold Funds: Gold funds invest in a diversified portfolio of gold-related assets such as physical gold, gold ETFs, and mining stocks. They provide exposure to the gold market without the hassle of owning physical gold.
Advantages of SGBs
Safety and Security: SGBs are issued by the government, making them a safe and secure investment option compared to other forms of gold investment.
Interest Income: In addition to potential capital appreciation, SGBs offer a fixed interest rate on the invested amount, providing an additional source of income.
Advantages of Gold Funds
Professional Management: Gold funds are managed by experienced fund managers who make strategic investment decisions to maximize returns and mitigate risks.
Liquidity and Convenience: Investing in gold funds offers liquidity and convenience, allowing you to buy and sell units easily through the stock exchange.
Considerations for Investment
Risk Tolerance: Assess your risk tolerance and investment objectives to determine the most suitable gold investment option for your portfolio.
Diversification Benefits: Consider how adding SGBs or gold funds complements your existing investments and contributes to portfolio diversification.
Conclusion
By incorporating Sovereign Gold Bonds (SGBs) and Gold Funds into your investment strategy alongside physical gold, you can enhance portfolio diversification and capitalize on the potential benefits of investing in gold.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Sanjeev

Sanjeev Govila  | Answer  |Ask -

Financial Planner - Answered on Sep 20, 2023

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@Anil Rego ji Namaskar - Intend to invest in gold bond, how should i proceed and which way is better to invest in gold bond ! i intend to invest in paper gold bond rather then purchasing gold physically. plz advise.
Ans: Gold can be a valuable addition to your portfolio. It has always been considered an asset that can hedge against inflation and other economic uncertainties. There are three popular ways to invest in gold.

Gold ETFs (Exchange-Traded Funds): Gold ETFs offer easy liquidity, as they are traded on stock exchanges just like stocks. They provide a direct exposure to the price of gold.
Taxation - Profits on the sale/redemption of Gold ETFs or units of gold saving funds bought after 31st March 2013 will be taxed as short capital gains irrespective of the holding period. So, this will be taxed as per an individual’s current tax slab.

Gold Mutual Funds: Gold mutual funds pool investments from multiple investors and provide professional fund management. They are an excellent choice for those who prefer a diversified approach.
Expense ratios and load fees can vary.
It is advisable to keep the investment in gold within 5% to 10% of one’s total investment portfolio.
Taxability is similar to that of Gold ETFs.

Sovereign Gold Bonds (SGBs): SGBs are issued by the Government of India and they provide an additional annual interest income. SGBs are suited for long-term investors who are looking for a safe haven asset and are willing to hold on to their investment for at least 5 years, preferably full 8 years to get the tax advantage of Zero capital gains tax on gains made.
The returns on SGBs are not guaranteed, and they depend on the prevailing market price of gold at the time of sale. There is a lock-in period of 5 years, so you cannot exit your investment before then.

SGBs may be the right choice. If liquidity and trading flexibility are important, consider Gold ETFs. Gold mutual funds are suitable for diversification, doing SIPs and professional management.

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Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 2024

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Hello Sir, Are gold MF not a great idea? Or are there better ways in the market than MF to invest in gold like SGB, ETF, etc? Or is gold investments itself in our portfolio not recommended or not necessarily needed? Really helpful if we can get a general understanding on investment of commodities like gold, silver, etc. Thanks.
Ans: Gold Mutual Funds are an excellent way to invest in gold without the hassle of buying physical gold. They invest in gold ETFs, allowing you to benefit from gold's price movements. These funds are managed by professionals, which adds a layer of expertise to your investment. Gold MFs are convenient, as they don’t require a Demat account, making them accessible for most investors.

Advantages of Gold Mutual Funds

Professional Management: Experienced fund managers handle the investments.

Ease of Access: No need for a Demat account; you can invest directly through your bank or mutual fund distributor.

Diversification: Gold acts as a hedge against inflation and adds balance to your portfolio.

Why Choose Gold MFs Over Other Gold Investments?

Gold MFs offer the convenience of systematic investments through SIPs, which can help average out the cost. Unlike physical gold, there are no worries about storage or safety. While Sovereign Gold Bonds offer interest, Gold MFs provide liquidity and flexibility, which is crucial if you might need to redeem your investment quickly.

Final Thoughts

Gold Mutual Funds are a solid choice for adding gold to your portfolio. They offer a hassle-free, professionally managed way to invest in gold, balancing your portfolio and providing protection against market volatility. If you’re looking for a simple yet effective way to invest in gold, Gold Mutual Funds are the way to go.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Asked by Anonymous - Jul 08, 2024Hindi
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Namaste Sir, Can Purchasing Gold of 15000 from now, give good return in next 5/6 years.
Ans: Investing in gold is a popular choice. It provides a hedge against inflation and economic uncertainties.

Historical Performance of Gold
Stability and Growth
Gold has shown consistent growth over long periods.

It tends to perform well during economic downturns.

Volatility
Gold prices can be volatile in the short term.

Over 5-6 years, it usually stabilizes and provides decent returns.

Analyzing Gold's Potential
Economic Factors
Global economic conditions affect gold prices.

Geopolitical tensions often drive gold prices up.

Inflation Hedge
Gold is an excellent hedge against inflation.

It retains value even when the currency value drops.

Comparing Gold with Other Investments
Equity Mutual Funds
Higher Growth Potential: Equity funds can provide higher returns.

Active Management: Managed by professionals for optimal returns.

Debt Funds
Stability: Lower risk compared to equities.

Fixed Income: Provides steady, albeit lower, returns.

Investing in Gold: Methods
Physical Gold
Tangible Asset: Can be held in the form of jewellery or coins.

Storage Costs: Requires secure storage, which may incur costs.

Gold ETFs
Ease of Trading: Traded on the stock exchange.

No Storage Costs: Eliminates the need for physical storage.

Sovereign Gold Bonds (SGBs)
Interest Income: Offers annual interest apart from capital appreciation.

Tax Benefits: Tax exemptions on redemption after maturity.

Disadvantages of Direct Gold Investment
Physical Gold
Making Charges: Adds to the cost when buying jewellery.

Security Concerns: Risk of theft or loss.

Gold ETFs
Market Dependent: Prices can fluctuate based on market conditions.

No Tangible Asset: Lacks the physical ownership aspect.

Diversifying Your Portfolio
Balanced Approach: Combine gold with equity and debt funds.

Risk Management: Diversification reduces overall investment risk.

Assessing Your Investment Horizon
5-6 Years Perspective
Gold can be a good investment for 5-6 years.

It may not offer the highest returns but provides stability.

Best Practices for Investing in Gold
Regular Investment
Invest regularly to average out the cost.

Consider a systematic investment plan for gold ETFs or SGBs.

Monitoring Market Conditions
Keep an eye on economic indicators.

Adjust your investments based on market trends.

Final Insights
Investing Rs. 15,000 in gold regularly can yield good returns over 5-6 years. Gold acts as a hedge against inflation and economic uncertainties. While it may not provide the highest returns compared to equities, it offers stability. Diversify your portfolio by combining gold with equity and debt funds. Regularly monitor your investments and adjust based on market conditions.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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