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Should I Invest in Gold and PPF?

Milind

Milind Vadjikar  |1030 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Jan 22, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
satish Question by satish on Jan 22, 2025Hindi
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Why we invest in gold and ppf. For ppf no guaranty of interest rate. Year by year interest rate reducing the Government...

Ans: Hello;

1. Gold(precious metals) is considered a relatively stable asset class having a negative correlation with equities. So it is advisable to have 10-15% allocation to Gold in your portfolio preferably through SGBs or gold mutual funds.


2. PPF is a social security scheme designed for people not covered under EPF/GPF. Ofcourse anybody can invest in it.

It's an E-E-E type of scheme. Tax exempt at the stage of investment (1.5 L max in a FY), interest earned and withdrawal.

Tax free and risk free 7.1% return is quite decent. Also since it's a social security scheme if suppose it's investor goes bankrupt even in that case the creditors cannot touch PPF money for recovery.

Having said this, it is your choice whether to invest in them or somewhere else.

Best wishes;
X: @mars_invest
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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Ramalingam

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Mutual Funds, Financial Planning Expert - Answered on Apr 01, 2024

Asked by Anonymous - Mar 06, 2024Hindi
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I availed loan of Rs. 15 lacs for business. Interest Rate is 10.5% PA. Due to some reasons, the investment getting delayed. Can l invest in GOLD and take OD against it as and when needed? The logic applied is appreciation of gold helps in interest cost.
Ans: While using gold as collateral to obtain an overdraft (OD) facility may seem like a viable option to manage your interest costs, there are several factors to consider before proceeding with this strategy:

Interest Rate Differential: The interest rate on your OD facility against gold needs to be significantly lower than the interest rate on your business loan for this strategy to be beneficial. Ensure that the cost of borrowing against gold is lower than the 10.5% interest rate on your business loan.

Risk of Fluctuating Gold Prices: Gold prices are subject to market volatility and can fluctuate over time. If the value of gold decreases, you may face challenges in maintaining the required collateral value for your OD facility. This could potentially lead to margin calls or the need to pledge additional assets.

Liquidity Constraints: While gold can be a valuable asset, it may not provide the same level of liquidity as cash or cash equivalents. If you require immediate access to funds, selling gold or obtaining an OD against it may not be as straightforward as withdrawing from a bank account.

Loan Repayment Considerations: Using gold as collateral for an OD does not eliminate your obligation to repay the original business loan. Ensure that you have a clear repayment plan in place to address both the business loan and any outstanding amounts on the OD facility.

Regulatory and Lender Requirements: Check with your lender regarding their policies on using gold as collateral and obtaining an OD facility. There may be specific eligibility criteria, loan-to-value ratios, and documentation requirements that you need to fulfill.

Before proceeding with this strategy, it's advisable to consult with a financial advisor or banking professional who can assess your specific situation and provide guidance tailored to your needs and objectives. Additionally, consider exploring alternative options for managing your interest costs and addressing any delays in your investment plans.

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Ramalingam

Ramalingam Kalirajan  |7981 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Asked by Anonymous - Apr 20, 2024Hindi
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Hi sir i am investigating ppfas in 6k per month and i am paying gold chit 12k per month and also recently bought land arount 9l now i am paying emi per month 30k still i have 10k per month in which way I invest that 10k
Ans: It sounds like you're already making some significant investments in PPFA, gold chit, and land, which is commendable. Since you have an additional 10k per month to invest, here are some suggestions:
1. Emergency Fund: Ensure you have an adequate emergency fund set aside in a liquid and easily accessible account. Aim to have at least 3-6 months' worth of living expenses saved up to cover any unforeseen expenses or financial emergencies.
2. Debt Repayment: Evaluate if there are any high-interest debts, apart from your existing EMI for the land purchase, that you could pay off faster. Prioritize debts with high-interest rates to reduce your overall interest payments and improve your financial health.
3. Diversified Mutual Funds: Consider diversifying your investment portfolio by allocating some of the additional 10k per month to mutual funds. Look for funds that align with your risk tolerance, investment goals, and time horizon. Diversification helps spread risk and potentially enhance returns.
4. Retirement Savings: Allocate a portion of the 10k towards retirement savings, especially if you don't have other retirement accounts or pension plans. Retirement funds invested early can benefit from the power of compounding over time, helping you build a substantial nest egg for your future.
5. Health Insurance: Invest in comprehensive health insurance coverage for yourself and your family, if you haven't already done so. Adequate health insurance can provide financial protection against unexpected medical expenses and ensure access to quality healthcare when needed.
6. Education or Skill Development: Invest in furthering your education or acquiring new skills that could enhance your career prospects and earning potential in the long run. Consider courses, certifications, or workshops relevant to your field or areas of interest.
7. Real Estate Investment Trusts (REITs): Explore the option of investing in REITs, which offer exposure to the real estate sector without the need for direct property ownership. REITs typically distribute rental income to investors as dividends, providing a source of passive income.
Remember to review your financial goals periodically and adjust your investment strategy accordingly. It's also advisable to consult with a Certified Financial Planner (CFP) to tailor an investment plan that suits your specific needs and circumstances.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner
www.holisticinvestment.in

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Milind

Milind Vadjikar  |1030 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Feb 17, 2025

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Hello sir, I am 33years old and like to have a stable life with a good retirement corpus along with children education. I have 2 sons both are of 1 and 3years old respectively and my wife is a housewife. I am having FD of 16L, 10L in gold, bought a flat paying housing loan EMI of 25K, having term insurance for 1cr and health insurance for 4L. I am making investments in mutual funds SIP of 30k since last 1 year. Hdfc dividend yeild fund 1000 Icici bluechip fund 8000 Quant small cap fund 1000 Canara robecco small cap fund 1000 Uti nifty index fund 5000 Icici balanced advantage fund 5000 Jm flexicap fund 2000 Quant elss fund 5000 Parag pareekh flexicap fund 2000 Lumsum Investments Sbi healthcare fund 20K Quant infrastruture fund 10k Sbi magnum gilt fund 20k Plz advice....am i really doing good with these investments or shall i replan my investments....
Ans: Hello;

Having 12 funds(9 sip+3 lumpsum) in portfolio is not required.

You need to just 4 funds for your sip of 30 K(divided equally):
1. Flexicap fund
2. Large and midcap fund
3. Balanced advantage fund
4. Multi asset allocation fund

You may consider exiting the sectoral, thematic and debt fund owned by you and redeploy it in your regular funds.

This ensures equity(large cap oriented)is predominant asset class in your portfolio but it also has exposure to debt and gold for balance and risk mitigation.

Also keep a target to step up sip amount every year by 7-10% atleast.

This will go towards higher education provision for your kids. (~1.85 Cr in 15 years considering 7% annual top-up and 10% modest returns)

For your retirement planning you may consider NPS and start with a decent amount(~30 K pm) as regular investment since time is on your side(27 years to hit 60 age).[3.45 Cr in 27 years without any step up consideration. 8% returns assumed].

Consider buying home loan insurance and super top-up health cover.

Happy Investing;
X: @mars_invest

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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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