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  • Jayant Manglik

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3 key reasons to buy gold this Akshaya Tritiya

Portfolio diversification with returns is one reason to buy gold this Akshaya Tritiya.

ET CONTRIBUTORS|
May 06, 2019, 02.38 PM IST
0Comments
BCCL
gold--bccl-1200
Buying from the numerous gold mutual funds is also an option.

Commodity Summary
MCX

GOLD
Akshaya Tritiya is a Hindu festival, which has become synonymous with gold buying. A large part of our population celebrates this day with religious fervour while many others get to know about it via jewellery advertisements in the media.

The word Akshaya means ‘something that never diminishes’. It is a belief that any venture started on this day will prosper.

What makes it a good day to start any new business, or even a new role – just like the new CEO of MCX – also makes it a suitable time to purchase perceived high value items like gold, widely seen as a symbol of wealth and prosperity.

Gold is also a symbol of security, risk diversification and wise investing. Since the festival occurs annually, Akshaya Tritiya is also an opportune time to invest in gold. One can also use the systematic investment plan route for such investments.

This particularly makes financial sense in India at the moment, as all gold is imported and a continuous depreciation of the rupee against the US dollar is a major factor driving gold prices currently.

Other global factors that can influence the yellow metal include strength in dollar index and global interest rates and, of course, taxes like import duties.

The rupee depreciation has been a consistent, defining parameter to make investment in gold. This makes the yellow metal a must-have in any portfolio in India, as it truly acts as a hedge against inflation, because rupee depreciation is fundamentally the difference in inflation between the US and India and this will continue for a very long time due to structural reasons.

Portfolio diversification with returns is another reason to buy gold. With lower volatility, gold promises to give returns based on rupee depreciation. Such returns usually average at around 5 per cent a year, with certain years showing higher or lower returns.

So which is the best way to invest in gold? There are many options to choose from. One could buy gold ornaments from a jeweller, but that is not great as a financial investment because of the substantial making charges involved.

Perhaps buying gold ETFs from your equity stock broker is the easiest option, as they can be bought in multiples of 1 gm and they will be placed safely in a demat account just like an equity share. Similarly, one can buy gold just as easily from your commodity exchange broker (your equity broker usually does this too) with bars of 10 gm, 100 gm and 1 Kg delivery available in demat as well as physical form.

Buying from the numerous gold mutual funds is also an option. Choosing this avenue can involve assessing your benefits in each of them e.g. some investors may prefer the safety of a demat account or the ease of buying through a stock broker while others may like to take it in physical form and keep it at home.

Ultimately all avenues track the price of gold and, therefore, meet the investment requirement. Like any investment decision, ultimately three things need to be kept in mind while deciding to buy gold – diversify portfolio to reduce risk, buy regularly via a systematic investment plan and hold for the long term.

Akshaya Tritiya can be a good opportunity to take the first step!
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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Rural gold demand likely to rise this Akshaya Tritiya

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