Women’s Guide to Investing in Gold This Diwali

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Hello ladies !

As we are in the middle of the holiday season and everything is happy, I’m going to start this piece with a not-so-happy statistic. According to data from the CMIE Consumer Pyramids Household Survey, only 5.4% of urban Indian women were employed in February 2021.

If you are reading this, there is a good chance that you will be making your own money and being part of this little bundle. But I won’t rush to congratulate you on it. Indeed, due to the predominantly patriarchal nature of India, a majority of working women always keep their distance from money matters like budgeting and investing and end up giving their wages to the men of the household for let them take care of it.

And so before I can congratulate you on how far you’ve come in a society where women aren’t necessarily encouraged to pursue careers, I urge you to reflect and evaluate. Is it enough for a woman to work and earn money? Or does true financial independence mean more than that? So you can make your own financial decisions and control your hard-earned money?

How difficult can it really be? You are educated, you are good at your job, and you are able to make your own choices. Above all; with tons of information available on the web and easy access to digital banking and financial services.

Don’t be intimidated by the multitude of investment opportunities that exist. Let’s start small. With Diwali and its tradition of buying gold here, and given that Indian women are known for their preference for gold as both a portable instrument and a savings instrument, let’s start by learning about the logic of investment in this auspicious asset class and the best way to invest in it.

While stocks generate growth and debt brings steady income, gold, due to its lower correlation with the other two, generally moves in the opposite direction, providing diversification and improving risk-adjusted returns. of the wallet. We saw this happen as recently as last year in March, when stock markets fell and gold hit new highs, cushioning the impact of the stock market crash on the investment portfolios of holders of money. ‘gold.

At the height of the pandemic last year, gold savings proved to be a source of cash for many people seeking funds for medical issues or income. Gold’s liquidity does not dry up even in times of financial stress, making it a practical and much less volatile asset to own in today’s unpredictable world.

While the ultra-accommodating monetary and fiscal stimulus measures of the Covid era helped revive consumer demand, they also caused inflation to rise. Look at the price of gasoline today. He crossed Rs 100 per liter! Gold prices have historically kept pace with inflation, which can help investors cope with the impact of price increases on their finances.

Let’s move on to the different avenues for investing in gold.

When investing in gold, investors should not underestimate the importance of the instrument used to gain exposure, as it can make all the difference. First of all, buying gold jewelry is not the same as investing in gold. This is because physical gold is often plagued with impurities and inefficiencies in pricing through mark-ups, fees, etc. that eat away at your returns.

Investing in gold is therefore best done through financial forms. Digital gold, gold sovereign bonds and gold ETFs are financial means of investing in gold. White digital gold offerings meet the criteria of purity and liquidity; they fall short of regulation and price efficiency due to high bid-ask spreads. Gold sovereign bonds pay annual interest and are tax-efficient, but they suffer from low secondary market liquidity, resulting in price inefficiencies. Gold ETFs are backed by physical 24k gold and allow investors to invest in low face value gold without worrying about the purity or storage of the gold. These regulated instruments are traded on the stock exchange at the prevailing market price for physical gold without fees or premiums. Mutual fund investors can invest in a Gold ETF through a Gold Savings Fund.

While there is no doubt that the tradition of buying gold on Diwali is a great investment and financial practice, this Diwali can also be an opportunity to leverage that tradition. Learn to differentiate between gold jewelry purchased for use and gold investments. Choose effective financial avenues for investing and start playing a bigger and more informed role in financial decision making.

Remember, dear reader, that if you can make your own money, you can manage it too. Happy Diwali!

(The author is Associate Fund Manager – Alternative Investments, Quantum Mutual Fund.)


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