In India, the investment landscape is witnessing an upward trend. We are gradually transforming from a saver’s economy to an investor’s economy. A wide array of investment options (Stocks, Mutual Funds, IPOs, Gold and Fixed Income products); coupled with access to the right educational resources have helped investors broaden their portfolio and invest right.
However, even with so many investing tools, gold is one of the oldest and most preferred investment choices for Indians, with a strong cultural history. Gold has seen a strong rally in the last few years, rising ~25% in calendar year 2023 and ~12% in 2024 (in INR terms). This explains the sudden rise in interest in gold as an investment option. There are several reasons why investing in gold is and will always be, a good option:
- Can be used as a hedge against inflation: As inflation rises, the purchasing power of currency declines. Throughout history, most major currencies have depreciated compared to gold over the long term. Gold thus, serves as a hedge against these inflationary pressures, offering a means to preserve wealth over time.
- Relatively lower risks: Investing gold is one way to ensure that your portfolio is more resistant to market movements and fluctuations. Gold reduces portfolio volatility because micro and macro factors affecting other asset classes may not affect the value of gold. Meaning, its value is not directly tied to the performance of companies or economic indicators. As a result, even if the price or value of other assets in a portfolio fluctuates, gold acts as a saviour, ensuring that the portfolio value is not adversely affected.
- Gold is a highly liquid asset: Liquidity translates to the ease of buying and selling in various forms. Since gold is one of the most liquid investment tools available, it can quickly and easily be converted to cash as per requirement. Due to this advantage, investors can turn to gold to protect their wealth during economic uncertainty.
For beginners, it is essential to understand the gold market: start small, diversify, and view investing in gold as a long-term investment. While Sovereign Gold Bonds are the most favourable tool for Gold investment, in case there is no tranch opening at a particular time, investors can invest in gold through Gold ETFs, and Gold Mutual Funds as well. However, while investing, it is essential for them to consider a number of factors: their overall investment objective, the time frame of investments, and a close eye on market trends.
For any investment journey to be successful and rewarding, it is imperative that investors keep all these factors in mind; cut through the noise in the market, and make well-informed and wise investment decisions.
By – Kavitha Subramanian, Co-founder, Upstox
