Gold has been the most preferred precious metal for investors in India and globally. Its inflation beating capacity and liquidity among other characteristics makes gold a popular mode of investment.

Benefits of having gold in your portfolio

Tangible Asset: Gold is a tangible asset and hence investment in gold creates a feeling of safety for the investors. Owing to its tangibility, even digital gold is less prone to hacking and other misuse.

Portfolio diversification: Gold can be included in your portfolio to create diversification as it has a negative to low correlation to all other major asset classes. There are instances when gold has shown an upward trend when the equity markets are falling. Gold protects your portfolio from volatility because macro and micro-economic factors that affect the returns of most asset classes do not significantly influence the price of gold.

Easy Liquidity:Gold is more liquid than other physical assets like real estate. Except for sovereign gold bonds there is no lock-in period in gold investments. The selling price or redemption amount in the case of physical gold depends on the denomination, purity of the gold, market price etc. It is possible to take a loan against gold investment in times of need.

Hedge against inflation:With escalating inflation the value of currency decreases. In the long term, almost all major currencies in the world have shown depreciation in value relative to gold. In times when inflation remains high gold provides a hedge against inflationary conditions.

Ways to invest in gold

Gold investment can be done by buying physical gold like coins, jewelry, bars etc. or by buying digital gold in the form of Gold funds, Gold ETFs, Sovereign Gold Bond Schemes, etc. Buying physical gold comes with a lot of disadvantages like safety and storage of the physical assets and wastage of funds on account of making charges etc. As an alternative you can invest in the following modes of investment in digital gold.

Gold ETF:Gold Exchange Traded Funds are bought and sold at the stock exchange like stocks and require you to have a demat account for investing in it. Through investment in gold ETFs you can engage in active trading at prices that fluctuate throughout the day. The underlying assets in the gold ETF is physical gold of 99.5% purity and stocks of gold mining and refinery companies.

Gold mutual funds:Gold mutual funds are Fund of funds of any Asset Management Company that invests in Gold ETFs.

Sovereign gold bonds:Sovereign gold bonds are released by the Reserve Bank of India (RBI) periodically and available for purchase through leading public and private sector banks. The returns on these investments are pegged to the price of gold and guaranteed by the Government of India. These bonds do not have physical gold as an underlying asset.