Wealth Guide: Akshaya Tritiya Special: Gold ETF - Expert explains why gold as an asset class tends to shine amidst uncertainty
Akshaya Tritiya Special: Gold ETF - From an individual investment perspective, it is prudent to maintain a nominal allocation (5-10%) to gold in a portfolio at all times.
Wealth Guide: Akshaya Tritiya Special: Gold ETF - One of the most often used adages about uncertain times is “this time is different” and yet a similar playbook is visible. The thing investors fear the most are uncertainty and there are numerous examples of it including what the world has witnessed in the last 2 years in the form of the pandemic and the ongoing geopolitical crisis. Usually, during such times, the tendency is a flight towards safety. And in uncertain times nothing shines like gold. Ahead of Akshaya Tritiya, Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC, shares his knowledge on why gold as an asset class tends to shine amidst uncertainty.
“The reason is that gold may be a non-income-yielding asset, but its biggest virtue lies in being a store of value that is equally valuable across cultures, geographies, and currencies. The natural human tendency of seeking safety in turbulent times makes gold a “safe heaven”. Uncertain times bring along inflation in which the value of paper currencies goes down. Since the supply of gold is limited, unlike paper currency, the yellow metal cannot be devalued, making it an attractive asset class, especially during times of uncertainty. Owing to this, gold has rallied whenever there is uncertainty and the recent example of this was seen during the onset of the pandemic and the ongoing Russia-Ukraine conflict,” says Chintan Haria.
Gold ETF
“From an individual investment perspective, it is prudent to maintain a nominal allocation (5-10%) to gold in a portfolio at all times. This will also bring in the much-needed diversification in an individual’s portfolio. There are quite a few ways through which one can take exposure to Gold like buying physical gold, investing in Gold ETFs, Gold funds/ fund of funds, or buying sovereign gold bonds,” Haria added.
“Among all these options, the one which is most efficient from a portfolio perspective is the Gold ETF. A Gold ETF is a fund that is traded on an exchange and it tracks the domestic gold prices as its underlying. So when an investor is buying Gold ETF, he is essentially investing in gold in electronic form,” he explained.
“There are several standout features of Gold ETF when compared to investing in physical Gold. To begin with, investors need not worry about safety and storage as Gold ETF units are held in demat form. Next, the cost of buying is relatively lower as there are no associated costs like making charges, etc. An investor also has the flexibility to buy or sell gold units on the exchanges at any point in time during the trading hours and finally, an investor need not wait till accumulating a sizeable sum to invest in gold. When investing in Gold ETFs, investors can start their investments by buying just one unit, the cost of which is lower than Rs. 100. For those investors without a demat account, they can opt for a Gold Fund which is just like any other mutual fund. Courtesy of all these reasons, investor interest in Gold ETFs has steadily increased over the last few years,” he advised.
“So if you are an investor looking for portfolio diversification or looking to accumulate gold for future requirements such as weddings, investing in Gold ETF is likely to emerge as the most optimal way to take exposure to the yellow metal,” he concluded.
(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
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