Diwali 2020 is coming up, and just like it is every year, people across the country may be considering investing in gold this time around as well. Investing in gold has always been a preferred strategy for conservative and aggressive investors alike. Gold investments have traditionally been viewed as both lucrative as well as sentimentally effective.
But unlike the years gone by, 2020 has been quite different. The COVID-19 crisis has caused many unexpected trends in the financial markets. And gold prices have also been on a steep rise in recent times. So, the question on everyone’s mind, and perhaps on yours too, may be this – is gold worth buying this Diwali?
Let’s look at some reasons why the yellow metal makes for a good investment option.
It acts as a hedge against inflation
Inflation is also on the rise, and the pandemic has resulted in prices of certain commodities rising faster than normal. But despite the rising prices, gold investments tend to elevate in value over the long term. In fact, gold prices have doubled over the past 5 years and quadrupled over the past 10. So, you have a good hedge against inflation by investing in gold. However, it is important to remember that the value of gold can also be affected by other factors, such as interest rates and economic growth. You may use an inflation calculator to see how much your gold investment will be worth in real terms in the future. This will help you determine how much you need to invest in gold to protect your savings from the erosion of inflation.
It is a highly liquid investment option
Liquidity is particularly important given the uncertain times we’re currently living in. And there’s always a market for gold. That makes the yellow metal a highly liquid investment bucket. In case you need some cash urgently for emergency expenses, you can easily liquidate your gold investments to meet that need.
It helps diversify your portfolio
Portfolio diversification is an important aspect of financial planning. And investing in gold is a highly effective way to diversify your portfolio. This is because gold has an inverse relationship with several other investment options like equity and currencies. So, any erosion in those investments is often offset by the growth in your gold investment.
Gold absorbs value erosions in the currency
Economic down cycles often negatively impact the currency of a country. However, even during such downtrends, gold tends to sail through relatively smoothly. Investing in gold provides a kind of cushion against falling currency rates. This is another good reason to consider gold as an investment option.
So, given these reasons, what are the options before you? You can invest in gold in any of the following ways.
Physical gold is perhaps the most common and conventional way of investing in gold. Here, you purchase the yellow metal and physically store it at home or in a bank locker. And to liquidate the investment, you sell it to a reliable third-party in exchange for cash.
This is an electronic way of investing in gold. Here, the problems of storage and the risks associated with storing physical gold are all eliminated. It’s quick and convenient, which explains why it’s quickly rising in popularity.
Gold ETFs are mutual fund schemes that invest in gold alone. This option is ideal for people who do not wish to actively track their investments on a day to day basis. They’re perfect for long-term investors.
So, given the advantages of investing in gold and the many options you have to follow this strategy, it’s certainly worth considering gold investments this Diwali. As Dhanteras approaches, it may be time to switch up your investment portfolio a bit and make room for the yellow metal.