Diwali is round the corner and there’s a palpable festive buzz in the air. It’s one of the most joyous occasions and for most of us, it holds a special significance in our hearts.
The Diwali festivities start with Dhanteras during which the God of Ayurveda, Dhanvantari, is worshipped. Another significance which has become more popular over time is that Dhanteras is an extremely auspicious day for making new purchases of Gold and Silver (Dhan). Gold bought on this day is considered a sign of good luck.
Gold holds immense significance for Indians since historical times and that continues till date. Before stock markets became popular and to a large extent even now, many buy gold as a store of value and for price appreciation.
There’s one question that I always get asked – should I invest in Gold? My short answer – Yes. Gold is an excellent form of diversification and I think one can have an investment of 5-10% of their portfolios in Gold. Gold, like Debt investments, has a low correlation with Equity, so it helps in cushioning your portfolio when Equity is not doing well.
One thing to remember is that Gold will not provide steady appreciation – rather the returns come in big chunks (like Equity). So, it becomes important to stay invested in Gold for a long time to reap the full rewards.
The more pertinent question of today’s time is – “What should be the channel of buying gold?”.
With modern times, there are modern (and digital) means of investing in gold. Let’s see how these mediums compare with each other and with the traditional medium of buying gold.
A quick glance at this table makes it clear that Sovereign Gold Bonds have clear advantages.
Sovereign Gold Bonds issuances are conducted by RBI periodically and are widely publicized. One more incentive is the discount of Rs. 50/ unit that is offered if one pays online.
I usually have a simple strategy w.r.t Gold. As a family, we purchase gold in physical form only when we want to buy wearable jewelry. For investments, the digital form is preferred – especially Sovereign Gold Bonds (SGBs). The extra 2.5% interest, Rs. 50 discount and capital gains tax exemption on redemption is too good to resist.
One can participate in all SGB issuances (just like a SIP) and buy a certain amount of gold each time. This helps in averaging the cost of investments and be disciplined in investing.
If you want to invest in SGBs during this Diwali, simply login to your broking account and purchase SGBs from the secondary market.
On that note, I would like to wish each one of you and your family a very Happy Diwali from the whole InCred Money Team.
Happy Investing,
Vijay
CEO – InCred Money
P.S. I share my thoughts on Investing and the Economy regularly. You can follow me here.
