Understanding Gold Accumulation Plan
There are many avenues available to invest one’s hard earned money like Mutual Funds, Shares, Government Securities, Commodities, Real Estate, etc.
Gold is one of the investment avenues which everybody likes to invest in.
- Significance of Jewellery in the life of women
- Indians passion to buy gold starts right from Child’s birth to Child’s Marriage to Gifting through inheritance
- To create wealth for the future
Gold: A less volatile asset class
- Performance of gold has not only been strong, but its volatility has also remained low
- Gold as an asset over centuries has maintained its value against inflation and is considered a hedge against inflation
- An ideal portfolio diversifier with very low/negative correlation as compared to other asset classes
- A safe heaven – In turbulent times, gold is used as an insurance against investment portfolios
Because of high gold prices it becomes very difficult for investors to accumulate gold. Those who have the potential to buy, looks for the dip or correction to buy the same, but fails to do so as nobody is able to catch the bottom.
|Physical Gold||Gold Accumulation Plan|
|Storage Requirement (Locker)||Paper Form|
|Risk of Theft||Not possible|
|Impurity risk is very high||No risk of impurity|
|Pricing are not transparent or standardized||Linked to international gold prices and very transparent|
|Making charges are incurred||No such charges are to be paid|
|Less convenient as it is required to be moved physically||More convenient, as it is held in demat form|
|Very tough to sell partial gold||Even 0.5 grams can be sold|
|Wealth tax is required to be paid||No wealth tax is levied|
|Holding period for Long term capital gain/loss is 3 years or more||Holding period for Long term capital gain/loss is 3 years or more|
Ease of Investing through Gold Accumulation Plan
- Systematic Investment Plan (SIP): A disciplined technique whereby every month you will be able to accumulate money for buying Gold, which will vary based on the prevailing spot price of Gold on MCX as on the date of investment.
- Small and regular investments go a long way in accumulating gold over time
- Eliminates the need to ‘time the market’ as nobody can predict the price movement. Trying to time the market is risky and can lead to mistakes, which can have an adverse impact on the plan to accumulate the gold
- Liquidity: An investor can subscribe and redeem units any time they want.