For Investors, the most important criteria while investing is Safety, Liquidity and Profitability. One can expect to meet all these criteria’s when investing in gold. Traditionally, people purchased gold for various cultural and religious reasons however over time they realized that Gold not only retains value but it can also be considered very important when building a portfolio.

One can consider gold in their portfolio due to several influencing factors including high liquidity for various reasons: -

1.       Diversification – Gold can help in mitigating risk in times of market volatility and economic uncertainty. There is a negative correlation between gold and stocks/Other financial instruments hence gold serves as a diversifying asset in Investment portfolio.

2.       Beats Inflation – Value of gold increases as the cost-of-living increases. As a result, gold acts as a hedge against inflation.

3.       Acts as a measure in times of Crisis – Gold is considered as a conventional and valuable asset during times of political unrest and financial stress. It retains its value even when other assets expect a downtrend. Investors look out for gold because it is a store of value even in times of crisis.

Lets understand this with an example. Meet Sarita, a mother of 3 who works in a 9-5 job and saves money in her savings bank account. When she got to know about investment in gold from her friend, she did her own research and learnt about the stability and long-term value of gold as an investment. After careful evaluation, she purchased a few gold coins every month and saw how value of her investment gradually increased over time. A few years later, Sarita’s eldest child was ready to go to the college. Thanks to her investment in gold. Sarita had enough money saved to help her pay for tuition and other expenses. Sarita is grateful that she took the risk to invest in gold, as it has provided her with financial safety net for her family’s future. She now understands the importance of diversifying her investments and is now confident about her decision to continue investing in gold for long term.

It is also worth noting that gold prices can be volatile and influenced by a variety of factors like geographical events, changes in currency values and international exposure hence risk and potential rewards should always be considered before investing in gold.

Now let us have a look at several ways of investing in gold.

1.       Buying Physical Gold- Gold Jewellery, Coins, Bars.

2.       Gold ETFs and Mutual funds.

3.       Gold Mining Stocks- Buying shares of gold mining companies.

4.       Sovereign Gold Bonds (SGBs)

Each option has its own risk and rewards, so it is important to consider your goals before investing. so, the bottom line is Gold as an investment can be beneficial as well as have some drawbacks. It won’t generate you regular income like stocks(dividend) and bonds (interest) but it works well in providing liquidity and its capacity to beat inflation.