In the ever-evolving investment landscape, gold has gained prominence as an asset class for diversification.

Also, as seen in history, individuals often seek solace in gold during periods of worldwide upheaval or global crises.

In this blog, we delve into the importance of diversifying your investments in gold and the various options available to invest in today’s times.

Why is it important to diversify your investments in Gold?

Diversifying your investments in gold can offer various benefits like:

Portfolio Diversification

Gold has a low correlation with other asset classes like stocks & bonds.

This feature helps to reduce overall risk in the investment portfolio.

Hedge Against Inflation

In times of high inflation, the purchasing power of currency diminishes.

However, gold retains its value and is therefore considered a hedge against inflation.

In fact, in times of rising inflation, gold prices tend to move up.

Safe-Haven Investment

Central Banks across the world allocate their reserves to gold, as the asset is esteemed as a refuge during geopolitical upheavals and wars.

Also, in uncertain times, people often flock to gold as it maintains its sheen.

Global Acceptance

Gold is recognized as a global asset class and can be monetized in any country, as it can be easily bought and stored in various forms.

High Liquidity

Unlike Real Estate, Gold is a highly liquid product and can be monetized easily.

How can you invest in Gold?

There are a number of options available for gold investment:

1. Physical Gold

2. Gold ETFs

3. Sovereign Gold Bonds (SGBs)

Physical Gold

Physical gold is one of the most preferred routes of investment in gold.

It can be invested in various forms like bars, coins, jewellery, etc.

However, the storage of physical gold runs the risk of theft.

Gold ETFs

Gold ETFs (Exchange Traded Funds) are instruments that invest and track the performance of Gold.

It is a convenient way to invest in an asset without having to purchase the commodity in its physical form.

Investors can hold gold ETFs as units, just like mutual funds.

Sovereign Gold Bonds

SGBs are government-backed schemes that enable investors to invest in gold without the need to own it physically.

SGBs mimic the returns of gold + provide an interest income of 2.5% p.a.

Conclusion

• Gold is an important asset class to consider in your asset allocation strategy
• Gold provides hedging tools in times of emergency and rising inflation
• Now we have options like Gold ETFs and SGBs apart from investing in physical gold

As you consider your investment choices, keep in mind the key factors discussed here to make informed decisions that align with your financial goals.