Kolkata, October 25: Each year on Dhanteras, buying gold is regarded auspicious. If you are buying gold, here are the five things you should know.
Traditionally, people have bought gold on Dhanteras as buying gold today is thought to bring wealth and prosperity to one’s home throughout the year. While that may be true, the purpose of gold for financial planning is slightly different. “Gold is more of a hedge against inflation,” says Shweta Jain, founder Investography. Traditionally, it is seen that the price of gold rises as the cost of living goes up. When there is high inflation and the value of a currency goes down, people tend to buy gold and hold their money.
Gold should thus form a key element in portfolio diversification. This is because statistically, gold has no correlation to other major asset classes. However, it has been seen in the past that when equities fall in value, gold prices go up, so there may be an inverse co—relation. The economic factors which affect returns of most asset classes do not have a significant impact on the price of gold. Jain recommends 5-15 per cent gold in one’s portfolio.
‘Physical gold is risky to maintain but it does have its charm,” says Jain. However, physical gold is difficult to store. Storing it at home is risky. Storing it at a bank locker can be expensive due to high locker maintenance charges. When buying physical gold it is also very important to be sure of the purity of the gold. Remember that the purest form of gold which is 24 karat, is not used for making jewellery. Such gold can only be purchased for investment purpose. Check the refinery from where the gold bar or coin has been refined and go for only reputed refineries. Also check for the Bureau of Indian Standards ( BIS) mark. However, 24 karat gold is not used to make jewellery. Jewellers will use 14,18 or 22 karat gold for that purpose. It is recommended that one buys hallmarked jewellery to be sure of its purity.
The other option is to buy digital gold. Buying digital gold is easy and you can start buying gold even with small sums of money. You can buy digital gold through mobile wallets like Paytm, Google Pay. Mobiqwik and Freecharge and also through mutual fund platforms like Kuvera and banking aggregators like Paisabazaar. Some banks also let you buy digital gold through their Internet banking facility. “However, digital gold is easy to sell which isn’t a great feature for long term investment,” says Jain.
You can also buy Sovereign Gold Bonds or SGB which are issued by the government. When you buy SGB, you are assured of the market value at the time of maturity plus a periodic interest at 2.5 per cent per annum, credit semi annually. These bonds are sold by nationalised banks, scheduled private and private banks, post offices and also by Stock Holding Corporation of India ( SHCIL) and by authorised stock exchanges.