How to invest in gold and meet your 5-10 % portfolio target

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Though experts believe that investors should invest a small part (5-10 %) of their portfolio in gold; they are, however, not unanimous about how to invest.

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Individual investors are responding "positively" to Reliance My Gold Plan, say mutual fund distributors. The plan allows investors to invest money in it through systematic investment plan (SIP) and get physical gold at the time of redemption . Though experts believe that investors should invest a small part (5-10 %) of their portfolio in gold; they are, however, not unanimous about how to invest.

Investors have plenty of options available to them these days. Those who are interested in buying gold in physical form can buy from jewellers, banks or accumulate gold through monthly schemes offered by jewellers . If you want to accumulate paper gold, you can buy exchange traded funds dedicated to gold or open ended gold savings funds.

Then there is egold from the National Spot Exchange; and Reliance My Gold Plan, where you can invest regularly but get physical gold at the end of the tenure. "Depending on consumption and investment needs, gold can be bought in either physical form or electronic form," says Amar Pandit, founder & CEO, My Financial Planner.

BUYING PHYSICAL GOLD

Many Indians prefer owning the metal physically. For such individuals, the traditional, simple and easiest way to buy gold is from the local jeweller. However, this may not be a very efficient way to invest in gold.

"Jewellers could levy a mark-up over the market prices and there are other issues like purity and storage," says Harshvardhan Roongta, CFP, Roongta Securities. If you buy jewellery, the making charges could vary from one jeweler to another. Finally, when you sell the ornament or jewellery, you will get the prevailing market price of gold minus all these extra charges. Also, safe-keeping physical gold is risky, that is why experts recommend accumulating gold in electronic form.

BUYING GOLD ELECTRONICALLY

"Investors could look at buying gold through mutual funds as they are well regulated and there are no issues of purity and storage," says Chirag Mehta , fund manager at Quantum Mutual Fund. You can buy units though the ETF route if you have a broking and demat account. If you do not have a demat account, you can invest through a gold savings fund offered by most fund houses.

"Investors can use the SIP route to build their gold portfolio," says Amar Pandit. ETFs are one of the most costeffective ways of owning gold. You can also buy e-gold through the National Spot Exchange of India (NSEIL). Here you can buy gold in units of 1-gram . You can hold it electronically in your demat account. However, you have the option of taking delivery at a later stage. "E-gold is one of the cheapest ways to buy gold as you do not even pay the asset management fees every year," says Anjani Kumar Sinha, MD & CEO, NSEIL. However, one has to open a separate demat account with the NSEIL. 

 

 

 

Md. Shane haider

Pgdm   2 sem