Gold is perhaps the most sought after precious metal in the world, with demand from various quarters since centuries. Its longevity combined with practical purposes have ensured that gold always has a market, and unlike the past, one needn’t wage wars or plunder cities to own gold today. Most countries have gold reserves and gold is openly traded on the market, ensuring that there is something out there for every budget. Trading in gold, can, however seem daunting to the uninitialized, with new terms and processes involved. Given below is a quick guide to gold stocks and how you can use these for your benefit.
What are gold stocks?
Stocks, in simple terms are shares which enable the person holding it to earn profits from it, generally in the form of dividend. Gold stocks are shares in gold which an individual owns in a gold company, either a mining corporation, gold Mutual Funds or Exchange Traded Funds. It basically means that you own a certain part of the company and you are entitled to any profit that comes out of your investment in the gold stocks.
Company Stocks Vs ETFs Vs Gold Mutual Funds
Here are some of the basic points about the different investment modes available.
Stocks in Gold mining companies – Gold is a natural resource which is dwindling every year, making it harder to find and mine this precious metal. Investing in stocks of gold mining companies is risky, but also comes with the allure of high rewards, with the ability of a company to find gold being crucial to your investment. Choosing a company with a good track record and debt should help you arrive on a decision.
Gold ETFs – These are units which represent physical gold, with each unit equivalent to 1 gram of gold (typically). There is lower risk in owning gold stocks in this format, with an option to trade the stocks in the market.
Gold Mutual Funds – These are designed for investors who do not wish to take risks or are confused about their investment option. Such mutual funds invest in companies which are involved in the production and distribution of gold, with a diverse portfolio minimising the risk. With professionals managing the fund, one gets expert help and input at every stage, albeit at an additional cost.
Things to remember before investing in gold stocks
Gold is not a cheap commodity and not playing your cards right could see you blow your hard earned money. Here are a few points which should be kept in mind if you intend to purchase gold stocks or already own them.
- Choose the investment mode – As mentioned above, there are three popular options to invest in gold stocks, either directly in gold-mining companies, in gold ETFs or gold Mutual Funds. Each of these modes have their pros and cons and these should be kept in mind before spending your money.
- Ask an advisor – It is possible to be overwhelmed while investing, which can hamper your investment choice. Availing the services of a financial advisor could cost you a little extra but they might help you get the best returns.
- Keep yourself updated – It is imperative that you keep yourself abreast of daily happenings, ensuring you know everything about your investments on a given time.
Popular investment options in India
The Indian economy is booming, offering multiple options for investors to choose from. While the markets can be unpredictable, gold stocks have performed relatively well over time. Some of the popular ETFs and Gold mutual funds in the country are HDFC Gold ETF, SBI Gold Exchange Traded Scheme, UTI Gold Exchange Traded Fund, Quantum Gold Fund and Kotak Gold ETF, with many more options available.
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