Once you have worked
out your requirements and the free disposable income that is available, the
next step to do is the allocation. The
question of how to multiply the savings that one has got to have enough when
each of the events occur. The first rule
is not to put all the money in one place or one scheme. When more returns are anticipated there is
more risk involved as well. It is
important to diversify the available savings into various Asset
Classifications.
The Bank Deposits will
not give you the growth that is required when you calculate the Net Interest
earned after paying the Taxes. Despite
the power of compounding, there are limitations on how much net return one can
get out of Fixed or Recurring Deposits.
With the problems some of the Banks are into it would be better to look
into depositing money in NSC or Kissan Vikas Patra. One can avail loan on these as well, whenever
any emergency arises.
The Importance of
having Gold has been inborn in our Tradition and Culture. It is slowly becoming out of practice these
days, mainly because of the lack of understanding. Gold is the perfect hedge for Inflation. It is often misunderstood these days as an
Investment. We keep hearing people that
they bought gold at ‘X’ Price and now it is has gone up or down by some
percentage. We also hear many people say
that Gold is a dead Investment and it does not generate anything except sitting
idle in the Locker. This is totally a
misconception. Gold should always be
treated as a Hedging tool and not an Investment Tool.
Gold allows you to
retain the Value of the Money at which it was purchased. We will take at a simple example to make it
easy to understand. Let us assume one
had deposited 1 lakh in Fixed deposit or KVP and left it for around 8.5
years. The amount one would have got
today on maturity is 2 Lakhs. Even
though the amount received is double the amount of Investment, is the real
value of 2 lakhs same as what the value of 1 Lakh was 8.5 years ago? Not.
Whatever Basic requirements of life One could have purchased 8.5 years
ago at 1 Lakh cannot be purchased today at even 2 lakhs. So, in real terms the value of the Investment
has gone down.
Now, let us replace it
with Gold. If 1 Lakh was used to
Purchase Gold at 1,800 per gram (the rate 8.5 years ago). Whatever Basic requirements of life you could
have purchased with the value of 55.55 Grams 8.5 years ago can be purchased
today irrespective of the Price of Gold today.
For academic interest, the current rate of Gold is Rs. 3.800 per
Gram.
Still not convinced.
Let us ask our elders at home what was the rate of Gold when they Purchased
it. Obviously, it would be a ridiculous
low amount. Now ask them what basic things
they could have purchased in 1 Gram of Gold those days. Access the price today for the same basic
items and you will find the amount required to purchase these items today would
be equivalent to the value of 1 Gram of Gold.
So, Gold is always an
effective tool to counter the Inflation.
Gold is not a dead investment in real terms. The Government of India frequently issues
Sovereignty Gold Bonds to the Citizens.
In this scheme one can Purchase Gold Bonds from the Government in
denominated Grams. There will not be any
physical delivery of Gold. Instead the
Buyer will be having a document that shows that he has ‘X’ number of Grams
under his name payable by the Government of India. The Government will give the holder of these
Bonds, the money equivalent to the Value of Grams the Holder owns, on the day
of Maturity. In addition to this the
Government give 2.5% Interest per annum on the Value of the Original
Investment. This is a fantastic option
for anyone who want to fight against Inflation and also have an option of
saving in Gold for their Child’s marriage.
These Bonds can be
Traded in the Open Market also. So, even
someone has no Money to Invest when the Government announces the next scheme,
they can regularly buy these Bonds in the Open market on monthly basis. But the rates may vary if one purchases this
every month. Even if one buys 5-10 grams
each time the Government comes out with such scheme, it may be enough for the
Salaried class to save considerable Gold for their future commitments. The Government comes out with such schemes
almost thrice a year.
Investing in Gold
Jewellery may be a bad choice as an Investment as one has to pay for Making
Charges when they Purchase and also forego some amount as wastage when they
sell a Gold Jewellery. When one
Purchases Gold Coins or Paper Gold (Gold Bonds or Similar Products) they do not
have to incur any such loses. Our Elders
were always right and that is why they wisely invested in Gold.
(To
be continued...)
(The above article was written for publication in Sep. 2019 issue of PRINCE’S VOICE – A Community eMagazine)
Posts
No comments:
Post a Comment