Do review your ‘Gold’ Investment

The Centre Government has launched Sovereign Gold Bond (SGB) for current financial year. While this is good opportunity to invest in this new asset class, lets recap the various advantages of this asset class for diversified portfolio allocation.

1.???Gold should be part of overall portfolio building exercise and cannot be ignored as an asset class. Historically, gold has been an excellent hedge against inflation and other economic concerns. Experts suggest that gold should be forming 10% to 15% of your entire portfolio.

?2.???Gold prices have witnessed fluctuation in recent years but generally its trended upwards. Even if we compare the level of fluctuation with its current market level, then it’s not significant. The outlook for gold in the future is uncertain, but experts believe that gold will continue to be a valuable asset. The overall international conditions where few countries are into recession and other few are into war mode; it is always advisable to take bet on this commodity.

?3.???Being an Indian, while we prefer the gold more into physical form; it is always advisable to diversify your gold investments into various forms based on your needs rather than carried away by emotions.

?4.???Physical investment into gold is advised in case it is of regular use like jewelry, ornaments, gift etc. In case the intention is to buy gold purely for investment purpose and earn market returns, it is better to explore other mode of holding gold like SGB, Gold Mutual Fund, Gold ETF etc.

?5.???Physical gold investment has its own challenges like purity, safety, storage, liquidity etc. The investment opportunity in newer asset class like SGB does remove such kind of challenges while ensuring that you are not impacted for your returns.

?6.???The investment in SGB does provides better taxation benefit to the taxpayer as compared to investment in physical gold. Further with stricter tax scrutiny, restrictions on holding physical gold without proper documentation it is always better to avoid physical gold to the extent possible.

?7.???The investment in SGB offers regular interest income which is missing in physical gold which generally does not yield any income. Further the investment in these new forms of gold like SGB does provide the facility of availing loan as well. Compared to physical gold, the collateral of such kind of assets provide better eligibility of loan amount.

?8.???The SGB, Gold Mutual Fund has its own secondary market where trades can be done. While there is no second opinion that it will take its own course to develop the healthy market, the facility of liquidity is at par with physical gold.

?While its just 2 days to close the first tranche of SGB offering, I do recommend my readers to review their portfolio (in initial period of new financial year) and add this glittering asset class to their portfolio based their requirement and risk appetite.