You can still invest in Gold ETF

Keep your auspicious date with gold by buying a small token like a coin and invest the rest smartly elsewhere this year. Though we Indians love the yellow metal and fancy holding it for emotional reasons , not many consider it to be a part of the investment portfolio.

However, thanks to the astounding performance of gold in the recent past, financial advisers are now recommending gold as an integral part of one's portfolio. Gold is also gaining currency because of its negative correlation with equity and debt in the backdrop of the uncertainties in the domestic and global economy.

"We recommend investors to have a 5-10 % of their portfolio in gold," says Rajesh Cheruvu, head of investment strategy, RBS Private Banking, India.

There are various ways in which you can buy gold. Traditionally , Indians are used to buying physical gold. However , it has its set of disadvantages . One, it is not cost-efficient as you pay a mark-up on the actual price of gold. Second , there is a problem in storing it and you may have to incur extra cost for renting a locker in a bank.

The new and smart way to buy gold, according to investment wizards , is Gold Exchange Traded Funds (ETFs) through your stock broker or gold savings fund from mutual funds. You need a broking account and demat account if you want to invest in an ETF.

Gold savings fund, on the other, doesn't need any of these and you can buy units just like any mutual fund scheme. The biggest advantage of these options is assured purity and units can be held in paper form. There is no risk of storage and it is very cost-efficient . Lastly, it is also tax-efficient as the gains are subject to long-term capital gains tax.

However, the only disadvantage is there is no way you can convert it back to physical gold. For those looking to convert paper form into physical gold at a later stage, you could consider e-gold offered by the National Spot Exchange. However, the only hitch is that you would have to open a separate depository account and trading account with a broker to trade on the National Spot Exchange.

However, before going ahead with your investment, please rein in your return expectations from gold, say analysts. "In the short term, gold prices could soften a bit. However, one could expect gold prices to be in the range of Rs 24,000 to Rs 25, 000 per 10 gram in a year's time," says Anand James, Geojit Comtrade . This means that you can expect an annual return of around 10-12 % from your investment in gold.

Source: Economic Times

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