InvestorQ : Can you tell me how I can invest in gold as an asset and what is the best method of holding gold in my portfolio?
Mahima Roy made post

Can you tell me how I can invest in gold as an asset and what is the best method of holding gold in my portfolio?

Answer
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Aditi Sharma answered.
7 months ago


Remember, gold is an investment for hedging purposes. It is intended to protect the portfolio consisting of equities and debt against global and domestic uncertainties. In tough geopolitical and economic conditions, gold outperforms other asset classes and thus gives a cushion to your portfolio. However, it is best to restrict your gold exposure to the range of 8% to 10% of your total portfolio. Now we come to how to invest in gold?

Today gold need not be stored as bars or jewellery alone. There are different ways of investing in gold. There are gold ETFs that invest in gold and issue equivalent gold ETF units to you. You can also invest through RBI Gold Bonds, which also pay interest at 2.5% per annum. Investors also have the option of buying e-gold using their electronic wallets, where much smaller units can be accumulated. We will leave out gold futures from our discussion as that is more of a trading position.

We need to understand why gold ETFs can be an interest method of holding gold

A good way to start investing in gold could be gold ETFs (exchange traded funds). These ETFs issue units denominated in grams against actual gold. Each gold ETF unit is backed by equivalent physical gold which is stored with a gold custodian bank like the Bank of Nova Scotia. Hence all your gold ETFs have real gold backing and are fully secured. There are some additional benefits of gold ETFs:

· Gold ETFs can be held in demat form in your existing demat account.

· Gold ETFs can be bought and sold during market hours through your trading account

· No worrying about finding lockers for your gold and worrying about gold loss each time you convert gold

· You participate in gold price movements and it is the ideal way to protect your portfolio

· ETFs are also cost efficient as they only entail brokerage cost in the market

Gold is an investment for protecting your portfolio and it is essential to take care of your portfolio risk in tough times. Among the various instruments, Gold ETFs can be an efficient and cost effective method off adding gold to your portfolio.