How Does Investing in Gold Work?

To understand how gold investment works, let's take an example. Aditya, a 36-year-old school teacher, wishes to buy gold worth about 1 lakh (Rs. 1,00,000) after one year. He starts investing in a gold investment scheme requiring monthly payments of Rs. 8,000 for 11 months, with a 10,000 discount on the last installment.

Through this plan, Aditya pays Rs. 8,000 x 11 Rs. 88,000 and gets a discount of Rs. 10,000. At the end of the year, he can buy gold worth Rs. 96,000. The benefit of not paying the last installment compensates Aditya for the Rs. 88,000 over 11 months.

Various Methods of Gold Investment

There are several ways to invest in gold through the exchange market:

Buying shares in gold mining companies - This option allows investors to gain exposure to the gold market via publicly traded mining companies. Buying gold futures - This is a speculative instrument where investors can buy or sell gold at an agreed price in the future. However, it carries high risks due to the principle of financial leverage. Investing in ETFs - index funds for gold - Exchange-traded funds (ETFs) that track the price of gold, providing a low-risk and diversified investment opportunity.

One of the most popular ETFs for gold investment is the American ETF, SPDR Gold Shares (GLD), which is the largest in the market. Noteworthy alternatives include ETFS Physical Swiss Gold Shares (SGOL) and iShares COMEX Gold Trust (IAU).

Reducing Investment Portfolio Risk

When comparing the above methods, it's important to note that investing in ETFs carries lower risks compared to buying futures contracts. Gold futures are a speculative instrument that offers high returns with equally high risks, primarily due to the principle of financial leverage used in short-term trades.

To minimize investment risks in the long run, ETFs for gold and gold mining shares are the optimal choices. Shares, for example, not only protect assets but also provide dividends. ETFs, on the other hand, are nearly 100% pegged to the price of gold, with the advantage of buying precious metal assets minus the ETF commission, typically calculated in tenths of a percent.

A Great Program for Starting Gold Investment

I highly recommend using one of the leading gold investment programs, such as the Golden Path. This program is proven and has helped many individuals initiate and manage their gold investments effectively. Whether you are a beginner or an experienced investor, this program provides a comprehensive guide to navigate the complexities of gold investment.

By leveraging the right tools and knowledge, you can make informed decisions and build a resilient investment portfolio.