GoldGold: AR

As an Indian, we feel very happy to invest in Gold. This is because of our colourful culture and age old traditional love for Gold. Most of the Indians invest in Gold as physical form (either as jewellery, coin etc ). Currently Gold price is getting corrected because of many reasons (will discuss on various reasons of Gold price correction in another article). We can see that, now days whenever there is a good correction in the Gold Price, people rush to buy Gold (most of them are physical gold). Many experts often predict in media that Gold price will come down to 20,000/-. So what should we do? Should we ignore investing in Gold? Should we wait till the price is low? Should we buy whenever there is a correction?

AR_RTo answer this question, we should understand how Gold as a part of our portfolio can help us. Gold brings diversification in our Investment portfolio, it also protects our portfolio at the time of economic uncertainties. That is the reason it is better to have Gold in our investment portfolio, but at maximum 10% of our total investment.

Investment in Gold as physical form has few disadvantages. Such as, purity of the gold, possibility of being stolen and also we cannot sell certified coin or bar bought from Bank. The maximum loss a person can have is when he/she invests in Gold as a form of jewellery. This is because we have to pay good sum of money as part of the wastage and making charges, also at the time of selling the same jewellery, the jeweller deducts 5%-10% from the prevalent rate of the gold.

AR_RPaper Gold is one of the smartest ways to invest in Gold. Paper Gold investment such as Gold ETF, Gold Mutual funds. Advantages of Paper Gold are, Purity of the Gold guaranty (99.5% purity), No physical delivery hence no need to think about storage security, No wastage or making charges. It does not attract Wealth Tax as well and can be traded in just a click of a button.

As an Indian tradition, we gift our child Gold Jewellery at their marriage. Since child’s marriage is a long term goal, we can choose SIP (Systematic Investment Plan) Gold Mutual Fund route. We can invest as low as Rs 500 per month to Gold Mutual Fund for our Child’s Marriage Gold requirement. At the time of marriage, we can redeem required units from our Gold Folio and can buy Gold Jewellery at that time with the latest design and of their choice. Apart from SIP route, if at any point of time we think that the Gold price has been corrected so much and plan to buy Gold, then we can buy Paper Gold.

AR_RTaxation on Paper Gold investment: As per the current law, 36 months holding period is required to qualify for Long term Capital Gain on Gold ETF or Gold Mutual Fund. Where tax will be 20% on the long term capital gain with indexation benefit. Indexation means, adjusting the cost of purchase for the impact of inflation, which will help to reduce the capital gain and hence the tax. If the investment period is less than 36 months then it is considered as a Short Term Capital Gain, which will be taxed as per the investor’s Tax Slab.

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