Indians are known for their love for gold metal. Particularly women are really emotional about buying gold.

Following points you can consider before investing in Gold

Differentiate between Gold Investment VS Jewellery
Define your primary purpose of buying gold. Whether it is investment or use (Jewellery)?
Many people go overboard and buy Jewellery and afterwards they rationalise it as an investment.

The reason this differentiation is important is because for consumption there are no objective criterions (If it is your priority and you have resources) but for investment there are certain logical parameters which you have to apply before you make a sound investment.

No Cash Flow
Gold has no recurring income like Stocks (Dividend) or Real Estate (Rent).

No Intrinsic Value
Gold has no value of its own but rather it’s a value given by us.

In contrast to this you can consider a company where there is plant and machinery, employee’s assets etc. where we can give it a reasonably objective value.
Same is the case with Real Estate .If you look at a 2 BHK flat it has a use value (People can use it for staying).

So remember gold value is only decided by the forces of demand and supply.

Returns from Gold in the last 30 years
Gold is not able to give any extraordinary returns in the last 30 years. It ranges between 7%-12%.

Also Gold can be considerably volatile. Which means you can incur loss in gold investment.

So what is to be done?

– Understand gold has a limited place in your portfolio. (Not more than 5%-10%)

– Invest in gold through electronic form E Gold, Sovereign Bonds, Gold ETF, etc.

– Don’t buy Jewellery thinking it as an investment.

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