Should Invest in Gold or not? – Advantages & Disadvantages

By Advisorymandi
9-January-2019 12:47:04 PM

We all have seen and read the ‘Buy Gold’ advertisement in the television and newspapers. In the advertisements, it is pitched that the gold is one of the safest assets during the time of an economic recession. Now, the question crops out here is how trustworthy are these advertisements? Is gold an excellent long-term investment? Conventionally, gold, the precious metal, is regarded as the best insurance policy during the financial troubles.

However, with the change in technology, in terms of the online trading and stock market apps, it has become quite an easier task to put your money in other investment options like the shares, mutual funds, Systematic Investment Plan (SIP) and so on. Most of the people, these days, even consider investing in the real estate an excellent option. But these options have some risk factors as your profits can increase or decrease, largely depending upon the market fluctuations.

Historically, gold is considered as the safest investment option. Every investor invests with only one objective in mind i.e. to be financially safe and grow money. People invest in gold for various reasons, mainly for achieving their financial objectives. It is quite right that for making an investment, there are certain important things, which are taken into the consideration such as the overall portfolio, returns, objectives, profits, etc. Similarly, for making an investment in gold, you must analyze the pros and cons before you take an investing decision.


Advantages of Investing in Gold         

So why investing in gold is considered as a good investment option? Amidst the economic and political uncertainties, the yellow metal is a popular investment because of the following advantages:

  • Liquidity: It is quite an easy task convert gold into the cash. Besides the liquidity, it can be purchased easily from any neighborhood jewelry store. When it comes to selling, then the local jewelers are readily available to provide cash if you sell or put gold as a collateral. You are not required to worry about liquidating your gold.
  • Diversification: In order to minimize the overall risk in the investment, most of the experts’ advice to go the for the portfolio diversification. Gold is one of the best assets to diversify the investment portfolio. Making an investment in the gold safeguards an individual against the market volatility. This is because the value of gold is inversely proportional to the shares and currency values.
  • Protection against Inflation: Gold is one of the best investment options that protects against inflation. When the inflation is on the higher side and the prices rise, then the value of good also rises. It is crystal-clear that during the time of inflation, gold can be considered as a stable investment. During inflation, most of the investors worry that their shares may underperform. However, that is not the case with the gold as it has got a history of performing excellently during the times of inflation.
  • Does not Require Maintenance: One of the biggest advantages of investing in gold is that you are not required to shell out any penny from your pocket to maintain them and can be kept in the safe place for many years. On the other hand, if you invest in the real estate or any other property, then you may have to spend some money to maintain them. The gold jewelry can be kept safely in the bank lockers for many years and you are not required to worry about their maintenance.
  • Best Alternative to the Stock Market: After reading this point, you will ask HOW? There is no doubt that investing in the stock market provides good returns. However, it also cannot be denied that they also come with lots of risks. The gold prices do not fall considerably when compared to the stock market or the real estate investments. Hence, it makes quite a sense to balance out your investments.


Disadvantages of Investing in Gold

Here are some of the disadvantages of investing in gold:

  • Low Returns: If you invest in the gold, then the rate of return of you get may be lower. This is because the price of the gold ornaments is not only determined by the prevailing gold rates or prices but also the making charges, when the gold is purchased. During the time of selling the gold, the making charges are not taken into the consideration and you get the returns or cash only on the gold rates going on in the current day.
  • Not a Steady Income: People make investment in gold in order to meet their financial objectives. An investment in gold is made only once or twice for the specific purpose and they are not sold every now and then just like the shares. Thus, there is no continuous flow of the steady income.
  • Price Correction: There may be a situation, when due to some panic, the value of the gold may appreciate considerably and this may create a panic among the investors as they may rush to purchase them. However, after the panic situation becomes normal, then the gold rates may correct itself and in such a situation, the investors have to endure substantial amount of losses.
  • No Dividends: When you invest in the stock market or mutual funds, then you get the interest or dividend, when the company makes profits. On the contrary, you do not get any dividends when you invest in gold.


Should You Invest in Gold or Not?

It can be said without any doubt that making an investment in gold can turn out to be a profitable option when all the other options fail. If you fear about the rising inflation levels or depreciation in currency, then adding gold to your investment portfolio can turn out to be an excellent option. Investing gold may turn out to be quite a tempting option but you must also not forget to analyze the advantages and disadvantages of investing in gold and try not to get carried away and take an informed decision.

What are your thoughts with regard to making an investment in gold? Do let us know your ideas by dropping your comments.


Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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4 Comments on "Should Invest in Gold or not? – Advantages & Disadvantages"

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Thomas Westgren
1 year 1 month ago

I like how you said that selling and investing gold is nice because you don’t have to sell out any money from your pocket. This seems like a really great thing to do because it would allow you to have a stable investment without having to spend more money on it. My wife and I may have to look into this as a possible retirement plan.

Rosie Beckett
Rosie Beckett
1 year 22 days ago

I had no idea there are so many benefits of investing in gold, so I appreciate the information in this article! You make a great point that it will diversify my financial portfolio. Plus, I won’t have to worry about inflation taking down its value in the future.

Ellie Davis
Ellie Davis
11 months 18 days ago

I liked that you mentioned gold can be considered as a stable investment even during inflation. My husband got the opportunity to invest in gold, and we are looking for options. I will pass this information to him to help him make the best decision.

Wade Joel
9 months 3 days ago

There’s no doubt that investing in gold is a great way to diversify your investment portfolio just as you mentioned. I was convinced to do it as soon as you mentioned that it does not require any maintenance and can be kept for many years. I recently inherited some money from my grandfather and I was looking for ways to invest it. After reading this I think I’ll invest in some gold coins and maybe start a small collection. Thanks for a great read!