The economic halt caused by the Covid-19 pandemic led to many market fluctuations over the last few months. As a result, investors are re-thinking their options and whether it is the right time to pour their funds into different wealth-creation avenues. We’ve already told you about whether you should invest in real estate during a pandemic. Now, it’s time to learn whether you should be investing in gold!
A. Top Reasons to Invest in Gold During a Pandemic!
1. The Prices will Continue to Rise
Gold has always been considered a precious commodity, which is why its prices have been steadily rising over the years. In fact, gold’s performance is inversely related to the market. This means that when the market is unstable and stocks crash, the price of gold soars. As a result, it can be a great investment for those who want a solid asset that can get them through tough times.
Over the course of the pandemic, even when the prices of other commodities have dropped, gold has continued to soar. Thus, if you’re looking for a long-term investment that offers a safety net even when other investments fail, gold is the right option for you.
2. Protective Shield against Uncertainty
Due to the fact that gold prices can help you beat inflation, investing in this commodity helps you stay financially stable even during uncertain times. Ensuring that you have gold in your portfolio will let you sleep more soundly, knowing that you have taken the right steps to make sure your family is always protected.
3. Lower Interest Rates Indicate It’s a Good Time to Invest
The interest rate associated with gold is generally connected to its price. When the price is high, the interest rates are lower so that more people can invest. On the other hand, when the price is low, the interest rates are higher, because low gold prices mean that the dollar is increasing in value (and exceeding the value of other currencies).
4. Good Hedging Tool Against Inflation
Another reason why gold is seen as a popular investment option, especially during uncertain times like a pandemic, is that it allows you to protect yourself from inflation. Gold is typically valued against the dollar. During inflation, the value of the dollar decreases, which means that the value of gold rises. Thus, you can ride out inflation by investing in gold.
5. Lower Risk in Your Portfolio
Finally, as you may know, it is very important to diversify your portfolio. The reason behind the same is to ensure that even if one investment instrument fails, others can still help you grow your wealth. Investing in gold is a stable safety net because, as stated earlier, when other commodities crash, gold often rises. Having gold in your portfolio means that you can bank on this option to grow your wealth, even if none of the other investments work out.
B. Top Things to Keep in Mind While Investing in Gold!
1. Invest in Digital Gold Instead of Physical Purchases
Many people believe that to invest in gold, one must buy jewellery, coins, or bars. However, this is not the case, and nor is it the best way to invest in gold. Physical gold comes with limitations – you must always be wary of theft and ensure a secure place to keep the assets. Digital gold takes away these hassles by allowing you to own gold, without actually requiring the physical asset to be with you.
2. Sovereign Gold Bonds are a Great Option
Sovereign gold bonds are considered one of the best ways to invest in gold. This is because they have an assured rate of interest of 2.5%, which is ideal for investors who do not want to take any risk.
Note that while such bonds have a total tenure of 8 years, you can exit any time after 5 years, making this option suitable for investors who want both long-term and short-term investments.
3. Understand the Difference Between Gold Mutual Funds and ETFs
Exchange-traded funds or ETFs track the performance of gold, while mutual funds refer to policies that allow many investors to pool their funds to buy stocks or shares of companies. In other words, gold ETFs will mirror the value of the underlying commodity, that is gold, itself. Gold mutual funds, on the other hand, will rise in value if companies that invest in gold or mine gold perform well. Both are good options for investing in gold, and you can choose one over the other based on your risk appetite.
4. Limit Your Gold Investments
The key to successful wealth creation is having a diverse portfolio. Do not go overboard investing in gold, as you will need other investment options to meet your short-term goals. This is because the best time to liquidate gold is during uncertain times when the prices are at their highest. If you require funds at an urgent notice, then it’s better to liquidate a different investment that may offer a high value when the market is stable.
5. Check for Hallmarking If You’re Making a Physical Purchase
Finally, if you’re planning to buy gold bars, coins or jewellery, then it’s important to check for hallmarking as they indicate that the gold is pure. Buying jewellery from reputable jewellery brands is one way to ensure you’re dealing with high-quality, pure gold.
As you can see, investing in gold is always a good idea, as the commodity is stable and offers a hedge against inflation.