Bullion
Precious metals that have a high market demand and market value
and are available in bulk are called bullion. They are traded in commodity
markets. Gold and silver are favorite avenues of investment for the Indian
investors because:
• They provide a hedge against inflation.
• Have sentimental and social values attached to them.
• They have ornamental value and medicinal uses.
Gold is one of the most valuable assets in any economy. It has
both financial and sentimental value in India. It is the long-term store
of value, is highly liquid and is the asset of last resort.It is easy to
buy or sell anytime anywhere. It is a ‘safe haven’ asset. In times of war
or international crises, gold price tends to appreciate.The right time
to purchase gold is when one understands what it is and what role it plays
in one’s portfolio.
Investors buy gold for Two reasons –
- To financially gain from increasing gold prices and to use it for hedging against
economic, political, and social crises. Although the price of
gold is always on the rise and it fetches higher resale value.
- In India Gold retained for the
social status associated with it and the feeling of security it gives.
Gold Holding ways Of People
People can be held Gold in the form of
- Bars,Coins &Jewelry,
- Gold certificates issued by a Banker,
- Gold derivatives(Futures and Options)
- Gold Exchange Traded Funds(ETF).
Central banks and international monetary organizations like the
International Monetary Fund (IMF) purchase gold. Whenever exchanged, gold
can get back the buyer the rate on that particular day. However,
derivatives like options and futures can be used to hedge the risk of an
increase in the price of gold. The buyer of a gold future or option can
take the physical delivery after the expiration of the contract or offset his
respective position.Similarly, ETFs allow investors to invest small amounts in gold
funds periodically so that at the end of a certain period or at
maturity,they can take delivery or get considerable amount of gold or can
take an equivalent amount of money.
Investment Ideas In Gold for Indian Investors
People can invest in gold through Gold bars and
Coins,E-Gold,Gold mutual funds & Gold ETF's .Many Indians,having an idea
that Buying Gold as Jewelry(Not For usage) considering them as
Investment,But its not an Investment.Because once it going for selling,it has
some depreciation.An Investment we made shouldn't depreciate its value &
Risk free.As Per Warren Buffet on Successful Investing Quotes
Rule 1:Never lose the Money
Rule 2 :Never Forget the Rule.1
Gold Investment ways having some positive & Negative
Features.Once People should aware before make an Investment with Gold.
Like Gold,Silver also having investment option like
E-Silver,Even Platinum too Having E-Platinum.
Gold Bars& Coins
Gold Bar/Coins can be Obtained easily through Banks &
Physical market.But its Negative Features too.
Negative Features
1. Banks charge premium is charged on gold bars and coins.
Reselling them is difficult.
2. Storage costs and making charges involved. Issue of safety is
also large.
3. Tax. Long term capital gains tax of 20% with indexation
applies only after 3 years of buying it. It attracts wealth tax.
E-Gold
Positive Things
1. No recurring charges like expense ratio of mutual funds, ETFs
involved.
2. Units as small as 1 gram can be redeemed for physical gold.
3. Greater price transparency.
Negative Things
1. Separate trading account and demat account needed for trading
in E-gold.
2. Not the best way to invest in terms of tax. It treated as
physical gold for taxation.
3. Newly launched product in India. Commodity exchanges are not
well regulated like stock exchanges.
4.Gains from E-gold, if it is sold within three years, are taxed
according to the tax slab and at 20 per cent (after indexation) if sold after
three years.
Gold ETFs
Positive Things
1. Units are backed by corresponding units of physical gold
which are kept in secured vaults.
2. Returns close to that of E-gold.
3. Long term capital gains tax of 10% without indexation or 20%
with indexation kicks in after 1 year. No wealth tax applies.
Negative Things
1. Trading account and demat account needed for buying ETFs.
Gold Mutual Fund
Positive Things
1. Through Systematic Investment Plan (SIP) of gold mutual funds
one can affordably have disciplined investment in gold. One can invest as
little as Rs 100 every month in gold funds.
2. Long term capital gains tax of 10% without indexation or 20%
with indexation applies after 1 year. No wealth tax applies.
Negative Things
1. Expense ratio is higher than in gold ETFs.
2. Returns slightly lower than that of gold ETFs depending on
fund’s performance.
These are Positive & Negative Features Of Variable ways of
Gold Investing Ideas in India.One Can made a right choice according to their
needs after analyzing these Positive & negative things.
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