Akshaya Tritiya is here. Unsurprisingly, gold is again back in the discussion. As much valuable gold is for making jewellery, it’s equally valuable for investors. In facts, investing in gold can protect you at the time of a market crash and can even protect your assets.
Let’s look at some of the factors you need to consider when you plan to invest in gold in order to diversify your portfolio.
Table of Content
Why Invest in Gold?
Gold is an important part of diversified investment portfolio because historically it has a negative correlation with major financial investments. It’s price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. Through the years, gold has served as a hedge against inflation and the erosion of major currencies such as US Dollar.
Further, the prices have always maintained its value over the long term, although it might be volatile in short term.
What’s the best time to invest?
Though one can invest in gold anytime, the best time to increase your investment in gold is when you are about to retire in a few years. By investing in metals a few years before retiring you hedge your savings from being affected by the market volatility. Precious metals are tangible commodities, and thus they have an intrinsic value, which helps keep the investment portfolio balanced.
If your investment is only in the stock market, without having such safety, then the stock market crash will probably leave you with no time to recover.
Further, as we suggest you to invest in the gold for the long term, you shouldn’t worry about the volatility much.
How to invest?
There are multiple ways to invest in gold – buy physical gold (bars, coins, and pieces of jewellery), invest in gold saving funds and gold-backed ETFs or buy gold based derivatives such as futures. While choosing amongst the above options is primarily a personal choice, investing in the online gold has multiple benefits including more liquidity, no worry of purity, and no standing in queues.
How much to invest?
We suggest not invest more than 5-10% of the portfolio in gold. Pick a number in this range depending on the amount of risk you want to take.
Hope we have answered all your questions related to gold investment 🙂 If you have any question, please feel free to ask in comments.