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Is Investing in Gold a Smart Choice?

dateKnowledge Centre Team dateSeptember 7, 2021 views214 Views
Gold Investment | Investment Portfolio | Financial Planning

Gold is regarded by a majority of the Indian populace as one of the top investment possibilities in India. Gold is not only seen as a reliable long-term wealth generator but also as good fortune and an emblem of social rank in this country. Due to the stock market's significant swings this year as a result of the pandemic's financial consequences, several investors felt compelled to discover ways to safeguard their holdings. During this time, one asset, in particular, began to gain momentum: gold.

Interestingly, a few years ago, fixed deposits were thought to be more attractive financial possibilities for Indians in the middle class. However, because the interest generated on Fixed Deposits has decreased significantly in recent years, FDs no longer appear to be a viable wealth-generating alternative as they once were. People are showing a resurgence of interest in gold investment these days.

Gold, on the other hand, is a long-term asset that is not ideal for short-term gains. Furthermore, gold prices move in a cyclical pattern. As a result, one cannot expect gold to perform consistently well.

Must Read - What is Investment?

Six Reasons to Invest in Gold

For centuries, Indians were already dealing in gold, and it has shown to be a sound investment. Here are some of the best reasons to invest in gold:

1) Gold Functions as an Inflation Hedge

In the past, gold has done better than equities or other investment options in high-inflation circumstances. There is no functional link between stock prices and inflation. However, because Gold is a commodity, its price rises when the economy experiences rising inflation.

Gold Investment | Financial Planning

2) Investing in Gold won't Break the Bank

Compared to real estate (which demands a larger first investment) or stocks (which involve documentation to open a brokerage account), dealing in gold is simpler for most Indians and does not require a large initial expenditure.

3) Gold Investment Provides High Cash Flow

If you hold a gold coin or piece of jewelry, you can simply liquidate it by selling it at a nearby jewelry store at any moment. Shares and mutual funds can also be quickly turned into cash. However, it may take a few days for such products to complete the reclamation and the selling cash to be credited to your bank account. Gold, in comparison to these securities, has a higher liquidity.

4) Gold Investing can help you to Manage your Portfolio's Risk

It is fundamental to vary your assets in an attempt to lessen your investment portfolio. Because gold has a negative relationship with stocks, it might be a practical way to diversify your portfolio. A theoretical loss on your equities portfolio might be sustained by your precious metals anytime your stock account is in a bear market.

5) No Specialised Knowledge is Required

When purchasing stocks or mutual funds, you must have a basic understanding of the market and economics to make the best selection. Such in-depth knowledge of the market isn't required with gold. It is uncomplicated and simple to invest in, making it suitable for all types of investors.

6) It will Always be Valuable

An agreement to pay is what money is. Gold, on the other side, does not demand such assurance. It's the only speculative investment that isn't also a liability for someone else. Gold prices have never fallen to zero in its 3000+ year history. As a result, it will always be valuable and robust, even if the market falls apart.

How to Correctly Invest in Gold?

1. Investing in Gold ETFs

You need not buy actual gold here because gold ETFs are a non-physical form of gold investment. However, you can invest in a gold-backed Exchange Traded Fund (ETF) whose value fluctuates with the price of gold. Dealing in gold ETFs is similar to owning gold; the only difference is that investors don’t get to keep the golden metal. It is stored in your Demat account and it is in Demat form.

Here is everything you need to understand about ETF Investment

2. Gold Mutual Funds

A gold fund is essentially a collection of ETFs. You can then purchase these funds and invest in Gold ETFs indirectly. You won't need a Demat account to participate in ETFs if you do it this way. You'll have to pay the fund manager a management charge. You can invest everything at once or utilise the same reliable SIP method as other mutual funds.

3. Keeping Physical Gold

You could also purchase gold coins or gold bars if you have a strong desire to maintain physical gold. Gold coins and bars can be purchased from banks or a local merchant. Banks usually sell gold coins at a premium and do not repurchase the coins or bars.

So, purchasing from institutions can be a little complicated because when you're about to sell it, you'll have to go to a jeweler, who likes buying from fellow jewelers due to the way gold trading in India is structured.

If you're considering adding gold to your asset base, we hope this article has given you a better understanding of gold investing. Remember to examine your financial goals, investor's risk, and asset allocation before making any investment.

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In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

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After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

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Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

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An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

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