Is Gold a good investment? The Gold Price today may seem like reason enough to buy gold but, substantial gold price fluctuations are few and far between. Despite that, you've seen your parents invest in gold coins, you know that over the past 10 years gold prices have changed a lot.
We've literally grown up listening to the saying, "Having struck gold!" So, should you be striking gold, caressing it or walking right past it? In this article, we'll talk about whether gold is a good investment or are there better ways to invest your money.
Truth be told anything you purchase can be considered an investment. In today's world where you can literally buy gold online, it's important to understand the difference between an investment and a good investment.
A good investment is simply one that can potentially rise in value and earn money for you. For gold or any other purchase to really work as a good investment it has to rise substantially in value, beat inflation and be useful in the meantime.
So, Is Gold A Good Investment?
Now, there are two answers to the question we've posed. The short answer is gold is not a good investment. However, it's not nearly as easy as that. There are many factors to consider.
Today you can buy gold online, you can buy digital gold, Gold ETFs, gold coins, gold bars, gold jewellery… you get the drift. All these purchases are perfectly fine as long as you know what to expect from gold as a form of investment. Which brings us to our next question...
Who Should Invest In Gold?
If you have already made other high-risk investments then it makes sense to invest a small portion of your wealth in gold. If you're someone who doesn't have a healthy and regular income then don't even consider putting more than 5% - 10% of your savings in gold.
You see gold can be volatile in the short term and is not a great way to preserve wealth. However, in the long term and I mean the really long term… that is 10 - 15 years, gold has always maintained its value. In India there is a special obsession with investing in gold - the whole country seems to be investing in gold and that in itself is a signal for you to not invest in gold unless you've closed all other avenues. It is a decent passive investment and can be useful in times of emergencies but, that's about it.
Benefits of Investing in Gold
There are a few key benefits of investing in Gold:
Gold offers fast liquidity
Gold is globally accepted
Gold acts as a hedge against market risks
Gold is an easy and mindless investment
Gold can be used for Portfolio Diversification
Some gold funds are viewed as non-equity and are taxed as long term capital gains after a 1 year
Disadvantages of Investing in Gold
Gold offers no inherent value
Gold is not a useful asset like property
The value of gold comes from the hope that someone will pay more for it in the future
It requires storage space and needs to be protected
Gold can be volatile in the short term
Involves making charges when bought as jewellery
When bought as Gold ETFs you will need to pay a fee to the fund and additional brokerage may also be levied
In case you purchase gold coins you will not be able to sell it to banks
Gold Investments does not generate any additional income
Taxes Imposed On Gold Investments
Different types of gold are taxed differently. Physical gold attracts short term or long term capital gains tax, depending on the period you hold the gold for. Anything under 3 years is short term in terms of physical gold. Some gold funds attract long term capital gains tax if held for over 1 year. Digital Gold and Paper gold like ETFs etc are taxed like physical gold but Paper Gold. It is best to sell gold after a minimum of 3 years to avoid heavy taxation.
How To Invest In Gold?
You can buy physical gold or digital gold through the many wallets that are available out there. However, we recommend you consult a Cube Wealth Coach for free and get advice on what is the right way to invest in gold for you.
Ans. Yes, gold is taxed as a short term or long term capital gain depending on whether you’ve held it for 3 years or more.
Here are a few more alternatives to investing in mutual funds, covered in this video by Team Cube.
Rishabh P Nair
Rishabh P Nair is the Head Of Brand Content at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.
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