Pros And Cons Of Gold Stock Investment

Investment is pivotal to wealth growth and also to ensure the financial future of self and family. We spend an immense amount of time thinking about it or at least we should. It is important and warrants the effort. If you are an Indian and thinking of beginning an investment portfolio then that means that you are considering more old school and proverbially safer options such as gold and government fixed deposits.

There is often a conundrum about the dynamics of investing in precious metals. While some consider it an auspicious and safe mode of investing, others feel the returns are just not commensurate. Hence, the following may help clarify the pros and cons of selecting Gold as an investment medium.

Pros:
 

  • Gold is a great option for investing especially for an economy experiencing down turn as it will prevent erosion of wealth.

 

  • It acts as a great cover for unforeseen requirements since there are ready loans available against them and they can be liquidated easily.

 

  • They are durable as investment options as well as assets. The conundrum posed by rupee consistently trading down against the dollar makes gold attractive for many.

 

  • To invest in gold coins and bars negates the short falls which are accompanied with buying jewellery. However, it is best to buy coins and bars of the precious metal from jewellers and not banks since unlike banks they can buy them back as well.

 

  • Gold purchases also open up one to thrft risks. Thus, gold ETFs  or mutual funds an be an alternative here.


Cons:
 

  • The rate of return for growth is currently lesser than equities which are slated to grow at a higher rate with the global economy looking at good times ahead.

 

  • The old school way in our country to buy gold is in jewellery purchasing. However, the purchase involves almost 10-20% costs in the form of making charges which are deducted at the time of sale later. Further, these jewelleries will usually fetch prices lower than market rates.

 

  • Prices are expected to come down with demand going down in 2014 as per world gold council numbers. The sharp hike in demand last year was the reason that many investors kept away from the precious metal in 2014 and this trend is expected to continue. Thus, this will not bear fruits in the short term.

 

  • Unlike equities which lie safely in your demat accounts, gold is prone to natural elements and risk of loss through theft.


It is always advisable to have gold in your portfolio but not too much since that would result in concentration of risk exposure.

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