HomeInvestmentI Want To Invest In A Gold. What Are The Options Available?
I Want To Invest In A Gold. What Are The Options Available?
June 13, 2021
In times of economic turbulence, investors turn their attention to gold. In the history of prices for this metal, one can notice surges during the crisis of 2008, at the end of 2018, when the trade war between the United States and China began, and in the spring of 2020, in connection with the coronavirus pandemic.
The collapse of markets due to the coronavirus is forcing investors to go to defensive assets like investment in gold in India. One can argue with whether investing in gold is relevant now, when the price of the metal is quite high.
We believe that in order to diversify the portfolio and protect it from periodic crises, at least 10% of the investment can be kept in gold.
If, with all this in mind, consider gold as part of your portfolio, the question immediately arises: how much to invest in this metal and in what form?
Bonds of gold mining companies
If you believe in the prospects of the gold mining business, believe that the prices for this metal will rise, but do not want to invest in gold itself, you can purchase debt securities of gold mining companies.
You will receive interest (coupon) income, as well as income in the form of the difference between the purchase price of the bond and the price of its sale (redemption).
But if a company has financial problems, there is a risk of losing its invested funds, so choose reliable companies – market leaders that have existed for more than 10 years, survived the 2008 crisis and have stable financial results.
Bond holders of gold mining companies benefit even in the event of stagnation or crisis in the gold market: the value of the investment in gold bonds in India and the coupon yield on them do not change during the entire maturity period.
On the other hand, if the situation in the gold market improves, the bond may also rise in price, and you can sell it for more than you bought it, without waiting for the maturity date.
The liquidity of bonds of large companies, as a rule, is high, so that such a security can be sold on the day of placing the order.
Such investments are, rather, investments in debt securities, and not in gold, and their price often depends on the general economic situation, and not on fluctuations in the value of the metal itself.
Gold ETFs (Exchange Traded Funds)
In addition to buying futures and physical gold, there is another way to invest in the precious metal in the market – these are ETFs for gold.
Buying ETF stocks is a convenient way to diversify your portfolio by investing in a range of financial instruments instead of buying and selling stocks of companies separately.
Investing in precious metals is an investment classic that has not lost its relevance to this day. Today the price of gold is constantly growing, along with it the number of private investors who want to invest in this precious metal is growing.