Should youngsters diversify their investment portfolio with digital gold? Experts decode

In an era when almost everything has shifted to online mode, new-generation investors have plenty of mediums to park their money in; one of them is digital gold. Investing in gold has been a traditional method of saving money and has also been a way to diversify investments. Digital gold is something that many people today are opting for since it's easier to invest in and does not require a safe place to keep it.

But is digital gold an ideal option for portfolio diversification? In this article, experts explain whether the new generation of investors should opt for digital gold as a way of diversifying their investment portfolio. 

What is digital gold? 

Digital gold refers to a financial asset that mirrors the characteristics of physical gold but exists in electronic or digital form. Its offerings are typically backed by actual gold reserves, ensuring a level of security and reliability for investors.

Online gold buying is made easier by services offered by FinTech like Paytm, PhonePe, and the Stock Holding Corporation of India. 

Should youngsters opt for digital gold? 

Mahendra Luniya, digital gold expert and chairman of Vighnaharta Gold Limited, believes young investors can opt for digital gold as it has the following appeal: 

-Hedging against inflation and economic uncertainty

-Reduces portfolio volatility

-Long-term wealth preservation.

Expressing a similar view, Dr. Renisha Chainani, Head, Research, Augmont Gold for All, also believes that digital gold is a good investment option as it provides a convenient entry point into precious metal investments, allowing fractional ownership and reducing the barriers to entry. It enables quick and cost-effective transactions and provides an accessible and flexible investment avenue.

Is investing in digital gold for portfolio diversification a good idea?

As per Augmont Gold's Dr. Chainani, diversification is key to managing risk, and digital gold adds a tangible asset to a diversified portfolio, complementing traditional investments. 

"Embracing digital gold empowers youngsters to build resilient and well-balanced portfolios that align with their financial goals and the evolving dynamics of the global economy," said Dr. Chainani. 

Palka Arora Chopra, Director, Master Capital Services Ltd., said on similar lines that the combination of fractional ownership, user-friendly platforms, and the potential for risk reduction positions digital gold as a valuable and accessible component of a well-diversified investment strategy.

On the other hand, Chopra also advised that it's crucial to acknowledge associated risks, including cybersecurity threats, liquidity, regulatory issues, and market volatility, before making an investment decision.

Vighnaharta Gold Limited's Luniya says diversification resonates across generations, and digital gold represents a fusion of tradition and innovation, appealing to the timeless allure of gold in the digital realm. 

What are the risks involved in digital gold?

Experts suggest that digital gold involves the following risks: 

-Lack of regulatory oversight.

-Has a maximum holding period.

-Vulnerable to cyber hazards.

-Attracts 3 per cent Goods and Services Tax (GST).

-Delivery and storage charges.

-Often impose selling restrictions, limiting flexibility in transactions.

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