Investing in Gold

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1. Gold is a precious metal and there is a tendency to hold gold as a store of wealth since ancient time. It is also used to make ornaments and jewelleries. Peoples are buying gold because of the following reasons.

(i) Gold is hold by the people because of its durability and malleability.

(ii) It is used for making ornaments and jewelleries. 

(iii) Gold is hold by the people to hedge against inflation as well as deflation. 

(iv) Gold provides a financial cover during geopolitical and macroeconomic uncertainty. 

(v) Gold is treated as crisis commodity because in times of geopolitical uncertainty it outperforms other investment and people can flee to its relative safer place during the rise of global tension. 

Price of 24 carats gold in India during the year 2001 was approximately Rs. 430.00 per gram which increased to Rs.2640.00 per gram during the year 2011. Its annualised yield comes out to be 19.89 percent. During the year 2021 its price was Rs.4872.00 per gram giving an annualised yield of 12.90 percent over a period of 20 years which not only beat inflation but also beat the maximum interest rate of term deposits in India. Therefore, one can think of including gold in one's portfolio. 

2.  No doubt investment in gold is good. But while purchasing gold ornaments one needed to take the following precautions.

(i)  Please ensure the purity of gold in the ornaments which you are buying. Purity of gold is determined by carats. A 24 carats gold is considered to be 99.9% pure and its purity get reduced with decline in the number of carats i.e., purity of 22 kt gold is less than 24 carats gold.

(ii) Hallmark certify the purity of gold and therefore it is advisable to buy hallmarked jewellery. 

(iii) Please check the actual weight of gold that you are buying and it should be exclusive of used stones in ornaments. 

(iv) Please check and compare the price of gold before buying and buy gold ornaments from a trusted jeweller or branded jewellery shops. 

3. Disadvantages of investing in physical gold.

(i) Price of ornaments and jewelleries include making charge which ranges between Rs.30 and Rs.60 per gram and also GST amount which you are paying at the time of purchase of gold from jewellery shop. But at the time of selling ornaments, you are paid only the price of gold (exclusive of making charge and GST) at the prevailing market rate by the shroff or jewellers. 

(ii) While selling gold to jewellers they reduce the weight of metal alloy and other impurities in the ornament to arrive at the actual weight of gold and you are paid accordingly based on actual weight of gold in the ornament at the prevailing market price of gold at the time of selling.

(iii)  You will not get any value for gold jewelleries if it is lost or stolen. You have to keep it in safe custody. You may have to hire bank's locker for safe keeping of your jewelleries for which you may have to pay annual rent depending on the size of locker.

It is better to limit the holding of physical gold because of the above risks. Is there any other way for investing in gold to minimise the risks associated with holding physical gold?  Yes, instead of holding gold in physical form you can hold it in paper form or electronic form. Government of India launched Sovereign Gold Bond Scheme in November 2015 under Gold Monetisation Scheme. Since then, several tranches of Sovereign Gold Bond Scheme have been issued. Sovereign Gold Bond Scheme has been explained in detail in the following paragraph.  

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4. Sovereign Gold Bond Scheme:  

Under Sovereign Gold Bond Scheme, the issues are made open for subscription in tranches by Reserve Bank of India (RBI) in consultation with Government of India (GOI). The Bonds are in denominations of one gram of gold or its multiple thereof. An individual person resident in India can make minimum investment of one gram and maximum of four kilogram of gold per fiscal year in such Bonds. The tenure of the Bond is 8 years with the exit option in 5th, 6th, and 7th year to be exercised on the interest payment dates. The price of the Bond is fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association (IBJA) for the last 3 business days of the week preceding the subscription period. The redemption price will be based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA. The interest is paid to the investors at a fixed rate of 2.5% per annum payable semi-annually on the nominal value of the bond. The interest is taxable but the capital gains tax arising on redemption of these bonds to an individual is exempted. The indexation benefit is available for the long-term capital gains arising to any person on transfer of bond.   

5. Gold Exchange-Traded Funds i.e., Gold ETF:  Gold ETFs are kind of mutual funds that are listed and traded on Exchange and can be hold in Demat form.  One unit of Gold ETF is equivalent to one gram of 24 carats gold. Axis Gold ETF, Kotak Gold ETF, HDFC Gold Exchange Traded Fund, ICICI Prudential Gold ETF, etc. are few Gold ETF Funds in India for investment. Most of the Gold ETFs are open ended. Gold ETFs are having the following advantages over physical Gold and Sovereign Gold Bonds.

Advantages of making investment in Gold ETF:

(i) Pricing of Gold ETF is closer to the actual market price of Gold compared to physical gold as it is devoid of any premium resulting from the making charges, GST, alloys and impurities contained in physical form of Gold i.e., gold jewelleries. 

(ii) Sovereign Gold Bonds are available to investors for investment when the issues are made open for subscriptions. But Gold ETFs are always available for investments. 

(iii) Gold ETFs are having more liquidity as compared to Sovereign Gold Bonds (SGBs) as it can be traded in open market at the free will of the investors and it does not have any lock-in period. But there is a lock-in period of five years for SGBs. 

(iv) Unlike SGBs, investors can remain invested in Gold ETFs as long as they feel like. 

(v) Unlike SGBs there is no upper limit for investment in Gold ETFs. 

(vi) Unlike Physical Gold, there is no scope for loss of value due to theft as Gold ETFs are hold in Demat form.

Disadvantages of making investment in Gold ETF: Gold ETFs are having the following disadvantages over physical Gold and Sovereign Gold Bonds.

(i) Capital Gains on selling of Gold ETFs are taxable. Long term capital Gains are taxed with indexation benefit while short term capital gains are taxed based on the tax slab of the investors. While Capital Gains arising on selling of Sovereign Gold Bonds are exempted from the payment of income tax. 

(ii) Unlike SGBs, there is no interest payment to investors. Return on redemption of Gold ETFs are subject to market risks.

(iii) Unlike SGBs, investment in Gold ETFs include Fund Management Charge, brokerage at the time of both purchase and sell of ETFs and administrative charges.

6. Conclusion: No doubt that the returns on investment in Gold is comparatively higher than that of debt instruments if hold for longer period i.e., at least 10 years. But our investment portfolio should not contain substantial investment in Gold. Investment in Gold should be limited to 10 percent of our total investment portfolio. Our investment in Gold should consist of physical gold, SGBs and Gold ETFs of which investment in physical Gold should be bare minimum. One can make investment in Gold ETFs through systematic investment plan (SIP). 

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  Safety and Security of Senior Citizens

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  I highlighted on spending quality time during second innings of life in various posts in my blog. Today I am writing this article to emphasis on safety and security which is equally important to enable us to spend quality time during second innings. The safety and security aspects will be discussed in this article in two parts.

1.  Safety and Security at Home 

2.  Safety and Security outside the Home

1. Safety and Security at Home: 

 All the senior citizens are required to take care of their safety and security at home from external threats as well as from internal threats. 

1. (i) Safety and Security from external threats: 

    External threats are the threats that comes to us from the sources outside our home. Strangers visiting your home may be an external threat. If you are staying in an apartment then your apartment is under common security provided by the Society or Apartment Owners' Association whatsoever may be. The security guards monitor the entry and exit of visitors inside the Housing Complex at the entrance of Housing Complex. Many Housing Complexes monitor the entry and exit of visitors not only through visitors register but also through CCTV cameras installed at the entrance of the Housing Complex and at the entrance of individual block or building. In addition, there is a mobile app called 'MyGate' which allow the visitor to enter if it is approved by the individual apartment owner. MyGate app is having multiple functions like visitor management, Community Management, Payment of Society Dues, etc. The link of MyGate app is MyGate. In addition there is an another app i.e. Gatekeeper App whose link is ApnaComplex. 

     Even after having common security arrangement in residential complexes, one need to be vigilant when a visitor is entering inside the apartment. One should have peephole as well as safety chain on the entrance door of flat or apartment. Peephole or magic eye is a small round opening lens through a door from which a person staying inside the house or apartment can see directly outside the door. Viewing is possible only in one direction through these lenses. Various types of peepholes or door viewers are available which one can buy online from amazon, flipkart, IndiaMART and many other sites. The link for amazon, flipkart and IndiaMART are 

(i) Amazon 

(ii) Flipkart and

(iii) India Mart. 

       In addition to peephole, safety door chain on the entrance door of house or apartment is required for additional security for preventing threat from unknown visitors knocking the door. Safety chain allows a person to open the door partially for safe viewing and speaking to visitors before deciding whether to open the door fully. Various types of safety chains are available which one can buy online from amazon whose link is Amazon. 

    Before permitting security guard at the main entrance of your housing complex for allowing entry of any visitor please ensure the identity of the visitor. Once the visitor knocks your door please see through peephole or magic eye to ensure the identity of the person knocking your door. If the person is unknown then open the door partially by putting safety chain on door. 

    Security cameras should be installed at home so that you can have eyes on your home even when you are outside the home. Have some emergency contact numbers and share it with your trusted neighbours. 

1.(ii) Safety and Security from internal threats:

   There are certain threats which a person may have to face while staying in home and these threats are not from external sources but exists within the close door of home. Unawareness about these internal threats may lead to accident. Security threat may come from kitchen, washroom, floor, etc. Wet floor is very dangerous and one may slip leg which may cause injury and bone fracture. Whenever you find water droplets on your floor, please get it wiped as soon as possible. Floor should be dry and clutter free. There are instances of slipping in washroom because of wet floor. After taking bath, please wipe out water on bathroom's floor to outlet with the help of wiper. This will help in keeping bathroom floor dry and clean. 

    There is another threat that may arise from your kitchen. Many times, kitchen floor become wet while cooking or washing vegetables. This may also lead to accident due to leg slip. Please keep your kitchen floor dry. Kitchen burner or gas oven should be handled carefully otherwise it may lead to fire hazard. After finishing your cooking turn of the knobs of gas oven as well as regulator of gas cylinder / gas pipeline to prevent gas leakage.  Don't forget to switch of electrical appliances in the kitchen after use. Keep fire extinguisher inside your home and also know how to use it in case of any fire hazard. 

      Have an emergency medical kit with thermometer, gloves, cotton, gauze, sterile cleaning solutions, BP / Blood Sugar monitor. Dim light in your bedroom and bathroom should be always on at night. Keep a loud alarm bell in addition to mobile phone beside the bed to enable you to call for help in case of emergency.  

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2. Safety and Security outside the Home:

One has to be more aware of one's safety and security while staying outside the home. While using staircase one should mind the steps while going downstairs as well as upstairs. It is better to hold staircase railing while using staircase as it protects us from injury in case of slipping of steps especially while going downstairs. If you are moving out of your home for going to vacation or tour then you have to take certain precautions as listed hereunder.

(i) Before leaving your home please ensure that all the water taps are closed, knob of domestic gas supply is put off, all your electrical appliances inside the home are totally switched off, all your windows as well as doors are closed and entrance door is properly locked. 

(ii) At this age never try to lift your luggage otherwise it may lead to orthopaedic problems. Instead use trolley bag to carry your luggage. You may find various types of trolley bags on Wildcraft, Meesho, Nashermiles and also on various online shopping sites. 

(iii) If you are travelling abroad then please have travel and medical insurance.

(iv) Please carry your regular medicines and doctor's prescription whenever you move out of your home for tour or vacation. In addition, please also carry some other common medicines and ointments to be used in case of any injury or other health issues as first aid. Please also have the information and contact number of Doctors in the locality where you are visiting so that you can have consultation in case of serious health issues. 

(v)  Carry your mobile phone whenever you move out from your home. Please keep your near and dear informed about the places where you are going and have their contact numbers to be used in case of emergency. 

(vi)  Please avoid posting your photograph taken at airport or Railway station in social media especially when you are on tour. 

(vii) Note down the vehicle registration number of your hired cab and informed that number to your friend in that locality in the presence of cab driver. It will be better to share the contact number of cab driver to your friend so that in case your friend is not able to contact you then he or she can contact your cab driver. 

      Let us have secured second innings to have quality life with full of joy and pleasures. Share this with your friends and relatives having elders in their home.

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