On this auspicious occasion of Diwali, we have grown up watching our parents buy gold and accumulate it for our future. This tradition has been so deeply ingrained in our culture, it goes on to show how much trust we have on this asset class.
Looking at the growth Gold has seen in last 3 years (2008-11), it seems to make all the sense. Somehow they instinctively knew how to diversify their portfolio.
However the very thought of buying gold raises many questions. Isnt it too cumbersome? Where do I store it? What about its purity? Taxes?
And ofcourse – Is it a good time to buy? Should I wait for price correction or will I miss the future rally?
For all this and many more reasons, SIP is the way to go.
An SIP takes away all the hassles of “timing the market” and inculcates a more disciplined and stable way of accumulating gold. One gets the benefit of cost averaging, and invests in amounts comfortable to the monthly budget. The table below shows how many “sovereign” (8 gms) or “tola” (11.66 gms) can be accumulated with an SIP of Rs 2000:
Assumption: Starting 2001, an SIP of Rs 2000 is executed on 2nd of every month. The current value of gold is taken as 27,000 per 10 gms. Past performance does not guarantee of future results.
For children marriage or that important goal, one can do a quick back calculation and see how easily one can achieve it with a small monthly investment.
Besides, there is no issue of purity or wastage as in case of jewellery. No storage charges and no insurance as in case of gold coins. To top it all, it is far more tax efficient than holding the gold in physical form.
This Diwali, add glitter to your portfolio. Gift your loved one a gold SIP!
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