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Gold vs Equities- Which is the right investment option?

Gold vs. Equities- Comparing between the two for long-term investment.

gold investment returns

There are some solid reasons why investment should be an important part of your long-term plan. The more you invest in the right product, the better you get the return. Various options of investment yield profit in the long term.

From stocks to bonds and real estate, you can choose what can give you the best return. Of all the investment options, people are quite confused between gold and equities.

The most valuable metal in history, gold has always been inextricably related to social and cultural contexts across all eras. In addition to serving as a sign of wealth in earlier times, gold was and still is left as a legacy to further generations.

But as better investment options, like equities and securities, have emerged in the contemporary era, gold as an investment option has lost some of its lustrs.

However, gold is still significant in most investors’ diversified portfolios. Additionally, it is an investment that can outperform inflationary tendencies. Investing in gold can offer financial security during periods of macroeconomic turmoil and uncertainty.

So, if you compare gold vs stock market or gold vs property investment, people still prefer gold because it presents an individual’s ability to purchase, irrespective of the price.

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What is the stand of gold trading in the market?

If you wonder if gold is a safe investment, check its market trends in the past few years. Since the price of gold keeps fluctuating, you need to watch it. The price of 10 gms of gold is around Rs 60,0000. Over the past six months, the overall price of the yellow metal surged to Rs 3,000.

If we go back to the Covid-19 period, the data conceived by the Indian Bullion and Jewelers Association Ltd states that Gold prices reached Rs 46,000 for 10 grams (999 pure) in the third week of April 2020.

The price of gold increased by 7% over the first two weeks of April. On April 16, 2020, during intraday trading at Multi Commodity Exchange of India Limited (MCX), the price for 10 grams of gold futures surpassed Rs 47,000. In April, investors received returns of about 11%.

Equity investment during the Covid-19 period

During the Covid-19 period, there was a huge share market crash. With stocks failing to rise, investors had a bad time. In March 2020, the Indian stock markets had a 23% decline.

The average decline in stock values was between 30% and 40%. Compared to global figures of roughly 15%, the market value depreciation of the Indian equities market currently stands at 25%.

What makes gold stay higher in demand than equity?

Investment experts agree that gold is one of the safest assets, particularly in a volatile market. As a result, more people are investing in gold-backed exchange-traded funds (ETFs) or physical gold.

According to data collected from the Association of Mutual Funds in India (AMFI), the value of gold ETFs was high by more than 34% between December 2019 and March 2020. One of the reasons behind this rise was the government stimulus plans, boosting liquidity while maintaining historically low-interest rates.

This might lead to an even greater rise in gold demand. According to certain predictions, the price of gold could increase by more than 30% in the upcoming year.

When should you invest in gold?

Gold investment returns can be high if done correctly and on time. Let us check when the right time is to invest in gold-

  • The time you want to minimise the risk

For many years, gold has been regarded as a secure investment. Gold is a great strategy to protect value in your portfolio since, unlike equities, whose value can change dramatically, gold’s value is largely steady.

You may not see the potential large gains from investing in equities, but you also won’t always see the potential large losses.

  • When you need to protect your finance from inflation 

Gold is a strong inflation hedge since it maintains its value for longer than other investments. Commodities like gold can be especially useful during rising interest rates and declining dollar value.

  • Best during a shaky economy

Gold is considered the best investment over equity or stock during the rising inflation and uncertainty in the banking system. It’s particularly useful when the stock market is in chaos.

Gold prices increased in six of the eight most significant stock market disasters in the previous 40 years.

Also Read: What is trend analysis? [Explained]

When is it better to invest in stocks or equities?

Like gold, equities, too, carry pros and cons. Having a good knowledge of when to invest in equity is important to get a good return. Some of these are:

  • When you desire the possibility of higher returns

Stock values frequently vary, making them higher risk but higher reward investments. For this reason, you shouldn’t invest all your money in stocks, but if you do, they can help you achieve long-term balance by making up a balanced portfolio.

  • While holding them for a while

Although stock prices might fluctuate daily, historically, the stock market offered a good return with an average of 10%. You must prepare to stay on your stock investments for years, if not decades, to benefit from this return. If you day trade, you face a larger risk of suffering a large loss quickly.

What are the factors influencing gold prices in India?

Multiple factors influence the overall price of gold in India. Some of these are:

The demand influences the gold price in the market. In Indian households, gold as an investment option is considered lucky, especially during the festive season. Gold will therefore be worth more if there is a significant demand for it.

Changes also influence the value of gold in the world markets. It is less volatile and seen as a great investment option for investors. It implies that when the price of commodities like oil and the dollar, which are both regarded as riskier and more volatile investments, declines, the value of gold increases at the same time.

Also Read: What is personal finance, and why is it important?

Gold vs Equities: Is gold still a safe investment?

If we compare gold vs. stock market or gold vs property investment in India, gold is still considered a better investment option. Equities are subject to risk, and with the economy being volatile in India, investing in gold is the best option.

Gold investment often yields moderate to high returns, especially when equities and bonds perform poorly. If you want to protect yourself from market shocks, consider increasing the proportion of gold investments in your portfolio.

Bottom Line

Investing in gold can be wise when an oncoming economic disaster is a real possibility. You have the choice to invest in physical gold and gold-backed ETFs. So, the choice is yours.

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