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With the stock markets swinging in the extremes this year due to the economic impact of the pandemic, most investors were prompted to find ways to hedge their portfolios. During this period, one asset started gaining traction Gold. If you have been considering investing in gold but are unsure about how to begin, here is a quick guide to acquaint you with gold investing in India.
While people in India have brought gold over for various reasons, usually cultural or religious, it has found appeal as an investment option as well. Here are a few things that work in favor of gold:
For centuries, gold has been the best store of value for the long-term (store of value is an asset that maintains its value without depreciating). The fact that it can play the role of money adds to its superiority and its outperformance of the currency value makes it attractive.
Currency is a ‘promise to pay’. Gold, on the other hand, requires no such promise. It is the only financial asset that is not someone else’s liability at the same time. In its 3000+ year history, gold prices have never dropped to zero. Hence, it will always have value and stand strong even if the market collapses.
If the inflation rates rise, the value of currency drops. However, over the last five years, despite the rise in inflation rates, gold prices have doubled. In India, where inflation rates tend to exceed interest rates, investing in gold is a hedge against inflation.
One of the most important features of gold investment is liquidity. Gold can be bought and sold in a very short time.
When you buy stocks or invest in mutual funds, you need some knowledge of the market and economy to make the right decision. With gold, no such knowledge is needed. It is simple and straightforward making it easy to invest in for all kinds of investors.
As an asset class, gold has a low/negative correlation with other asset classes. Hence, it is helpful in diversifying or hedging your investment portfolio against market volatility.
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