Gold has always been considered a safe-haven investment. The value that it contains can be said to be drawn from various things – its history as a currency, and later, as the material (gold reserve) backing the currency.
According to S Ravi, former chairman of Bombay Stock Exchange, Managing Partner at Ravi Rajan & Co, gold should form a crucial part of any investor’s portfolio, anywhere between 10-15 percent.
"Like if one is saving Rs 100, Rs 15 should definitely go in gold. Also, a good gold investment means a mix of all modes- physical gold such as bars and coins, sovereign gold bonds,
gold mutual funds and ETFs," Rajan advises.
Here are key reasons why one should invest in gold:
Hedge against inflation
As per Ravi, one should take gold more as a hedge.
Since gold is not responsive to stock market movements, holding it helps in hedging the risks associated with market-linked investment instruments.
The current falling price trend
As per Ravi, gold is set to fall marginally below and will rise only after 2-3 months. This makes it one of the best bets now.
It must be noted that the government while presenting the budget 2021-22, announced a
cut in import duties on gold and silver to 7.5 percent from 12.5 percent. However, it also imposed a 2.5 percent cess – a separate tax – on the imports. After the changes, gold imports effectively attract a 10.75 percent tax.
The reduction in duty on gold and silver has led to a correction in prices.
Good returns when invested for long-term
Ravi stresses that gold is a long-term investment that has been proved historically.
For example- sovereign gold bonds or SGBs, which have been one of the favorite routes for retail investors looking to take exposure in gold, offer interest at 2.5 percent on the invested value to its investors. So, for those who are investing for a very long period, 2.5 percent interest can make a big difference to the overall return.
Additionally, with SGBs, investors are not required to worry about the storage of gold as it is in a demat form. Also, there are no local taxes that a buyer needs to pay while buying.
Easy liquidity with gold ETFs
Gold ETFs do not charge any exit loads and offer higher liquidity. Units of gold funds can be redeemed by selling them back to the fund house based on the NAV for the day.
Physical gold also provides an easy liquidity option.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
