Till today, gold has been one of the major preferred sources of investment for the majority of investors for decades. This metal has not lost its luster and presence in the minds of people, especially among Indians. Whether it is a wedding or a gala, gold is chosen as an absolute clothing accessory to give the final touch to the final look.
If the market becomes volatile or inflation hits the economy, investors see gold as a lifesaver, which can be used as a hedge. This shimmering metal can be a handy asset for investors who hold stocks, as it is a hesitant market. Now, if you are an investor considering investing in gold, you should keep these five things in mind.
1. Physical gold versus gold stocks: There is a subtle difference between buying physical gold and investing in gold stocks. The two are not the same, as physical gold implies the tangibility of the asset. It means that you feel the physical presence of this metal. When it comes to gold stocks, you don’t spend your money on physical gold, but rather invest in gold mining and gold-related companies. Investing money in gold stocks is one way to gain exposure to gold and gold markets.
2. May not provide substantial returns: Gold may not bring you substantial gains on your investment, but it is the safest choice when the economy is going through a crisis. It’s probably not the best choice for investors looking for long-term gains. However, it is a plus when it comes to generating wealth or security during financial pitfalls.
3. Best asset of choice for diversification: Investing in gold can be done in many ways. One can invest in gold via shares of gold mining companies, gold ETFs, buying physical gold, etc. If there is an asset that barely reduces purchasing power, it is gold. The best part of investing in this glittering metal is that there is also no counterparty risk attached to this asset.
4. Acts as a hedge against uncertainties: While some invest in gold for security purposes or store their wealth without being affected by the economic crisis, some invest in this asset for hedging purposes. When an unprecedented event occurs causing prices to rise, or very recently a pandemic has hit the economy by a storm, gold can be a propitious asset to recover from market turmoil.
5. Liquidity and negotiability: People buy gold not only for luxury events but also for investment purposes. Paper gold is more liquid in nature as you can simply trade it in the bullion market for cash quickly. You can sell gold to anyone, regardless of where the buyer or seller is from. When it comes to tradability, gold’s spread is narrow compared to other assets, which makes it easily tradable. The narrower the spread (difference between the ask price and the bid price), the better the tradability of the asset.