investing in gold

Gold has always been a traditional form of investment especially for Indians as it is considered auspicious to buy gold in festivals. it would be though surprising to note that Gold has never gone down on year on year basis except for couple of years in last 30 years.

Considering this Gold is considered one of the safest investment and Indians who have been extremely bullish kabout the investment in gold
to reduce the risk their portfolio carries.unlike silver which is more volatile gold has seen steady growth as well as sporadic positive growth in the years gone by.

Though the returns offered by Gold has been in the tune of 8 to 10 percent, liquidity it offers makes it a strong investment proposition. For example options like loan against gold with subsidised interest rates offered by banks and the immediate liquidity it offers makes it a must in your investment strategy.
Gold funds which are available in market also needs consideration however in my opinion long term investment in gold still will outperform the returns offered by funds if one has the patience to hold it for a longer period of time.
For example I had done few investments in gold in 2006 wherein the rate of the Gold was around 8000 today post 7 years the rate stands at 30000 which is a sure 20 percent return on investment as of date. Though it looks attractive the returns may vary depending on how financial markets will perform.however the track record suggest Gold as one of the safest forms of investments.

The tax laws governing the gold purchase and sale is highly debatable as lot of Indians are also buying and gifting gold for traditional reasons like festivals and marriages etc’ than there may be few who might be using this as a tax evasion tool however now onwards on every purchase and sale of gold declaration of pan number has become mandatory and therefore some one trying to avoid taxes might face severe consequences therefore buying gold to evade taxes will not be a prudent decision.

 

Graphical View of Gold CAGR over 50 Years

Gold Historical Prices

 

Financial Planning!

Idea here is how one can understand and implement basics  of financial planning . The objective is that we start managing our money else someone else will manage it for us and make profit out of it.

The first principle of money management is to manage yourself first .which means that making oneself aware that money we spend is important. Why the word spend is important because if ” Money Management Is your problem whatever you earn is not going to be enough.” Rich dad poor dad ” is the book one should read to generate long term wealth.

There is no shortcut to generating wealth it needs consistency  patience and confidence in wat you believe in.However its important to understand few basic patterns of your long term investment strategy. In India there are majorly 6 basic form of investments .The form of investment you choose will define your strategy of managing your finances and the long term and short term habits you develop.Let’s now clearly understand how this 6 strategies of investment operate.

Tounderstand this better let’s look at how a common man with a common sense thinks.

1.I want good returns on my investment 10 percent plus with guarantee of capital.

2. I want to earn larger profits in short term say 3 to 5 years .

3. I do not want to lock money and whenever i want it should be available to me.

Considering these 3 priorities the 6 investment strategies which evolve are 1.Gold Silver strategy 2.Equity Strategy 3.Real estate strategy 4.Guranteed return instruments 5.Tax planning strategy 6.Investment and life protection strategy.

Going forward we will look at how each strategy works and wats best suited to diffrent temprament of investors,