Buying gold,the smarter way

Gold ETFs are available in denominations as low as half gram.

Weve come a long way since Indian women were only known as great home-makers. Today,women,are wonderful mothers and wives with their own share of household responsibilities,and yet at the same time they build respectable names for themselves in their professional spheres. These women who represent the India of today have moved past the clichés of normal existence,shattering any glass ceiling that might have hindered their flight.

With the passage of time,as women have moved out of the kitchen and up the corporate ladder,into managerial and financial roles,one might have wondered if the steely corporate jungle would have dimmed their fascination for the aesthetics. Quite the contrary actually! Indian women8217;s allure for everything that glitters and shines has all but waned,with a more bias towards the yellow metal. Though,primarily used for adornment purpose,gold is the perfect avenue to help women save and create wealth. Ofcourse,a strong reason backing gold as an avenue for savings is the need to own something real which in dire circumstances can help you with real value and which also keeps pace with rising prices.

Following the 8220;save as you go8221; method,women today try to save as and when possible,setting aside small amounts regularly from their monthly budgets,and when the amount reaches a substantial buy amount,they visit their jeweller the very next day to convert those savings into gold. An interesting and almost ideal way to invest in gold.

The issues
Trends testify to the fact that gold investments have delivered handsomely over the years; and yet there are a few ways to better the investment process.

Every Indian family has some part of its inheritance in gold which is passed down from generation to generation,with the advice of safeguarding the small treasure and the blessing of adding more to it before it is to be handed over to the next generation. And this is how investing in gold forms a part of the very soul of Indian tradition and culture.

While religiously following the tradition of owning gold,the inefficiencies involved in the process have been totally overlooked. A lot of these inadequacies had to do with lack of options to own gold. Our grandmothers and mothers knew the family jeweller8217;s shop as the only place to buy real gold from,and they would purchase gold largely in the form of physical jewellery as this was the only form of owning gold permitted by regulations then. And they would proceed with their purchase without much of a thought about premiums and making charges. Today,however,there are more convenient ways like Gold Exchange Traded Funds ETFs to own gold,especially if you are looking to invest in gold as an insurance against inflationary times and as a safeguard for your other investments. However,unfortunately,lack of awareness about ETFs still cause investors to choose the traditional way over the more affordable and convenient one.

Every penny counts
Ofcourse we understand that women will always share a special bond with jewellery and hence gold will always be bought more as an ornament. But,there is a large part of gold investments that are done for savings and to create wealth. It is this portion that should be bought more efficiently through avenues like Gold ETFs.

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If you have a doubt about Gold ETFs being paper money,correct yourself 8211; Gold ETFs are as 8220;good as gold8221; i.e. each unit is backed by pure physical gold holdings stored in secure vaults and are completely insured. Gold ETFs offer you affordable pricing,takes care of all your purity and storage issues and most importantly are highly convenient. Total convenience with no hassles and zero hidden costs!

And if you are among the women who buy small pieces of jewellery,which they then try to exchange for a larger set,take my advice and STOP right now! Because when you buy gold from the jeweller in form of jewellery,he adds on a premium and a making charge and you end up paying about 10-20 per cent higher than the actual value of the gold. And when you give your old jewellery to remake in a new design,he cuts a discount on the value of the gold. In both trades,you lose out on the price.

A rule of a thumb says that just more than three times you engage in an exchanging old for new transaction,you end up nearly losing out your initial capital completely on account of premiums,making charges,resale discounts,etc.

Indian women follow the same cost averaging approach to buy gold after accumulation of sizable savings. It usually happens that the savings fall short to buy the intended quantities because of price increases. In reality,the cash that you save keeps on loosing value when measured in gold. It is thus ideal to buy smaller quantities of gold may be ½ gram as you save instead of leaving your cash lying idle. However,buying smaller denomination coins to meet this end can be extremely expensive,as coins come at a premium and smaller the denomination usually larger is the premium.

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Gold ETFs help to serve the purpose here,since they are available in denomination as low as ½ gram and are ideal for accumulation. Also,many accumulate gold to plan for their daughter8217;s marriage,for this long term requirement,Gold ETFs serve the purpose of systematically allocating to gold. For example,buying ½ gram Gold ETF every week for the next 20 years would build a gold savings of 520 grams which is more than half a kilo of gold.

Overcoming the sentiment attached to holding gold physically is likely to be beneficial to your long term savings. Women should lead the role of being responsible buyers and break the traditional restraints and own gold in a more efficient manner. Nothing stops from making Indian women the great fund managers that they rightly deserve to be.

Author is a Fund Manager 8211; Commodities,Quantum AMC
Views expressed by the Author are personal