Fintotal News Analysis | Gold Fund(a)s!
Gold Fund(a)s!
Ruby Jacob, 19 Jul 2010

Whats happening?

If you have had a wedding in the family, you would have likely been pinched by the unexpectedly high price of gold these days. And if you are going to have one in the next few months, be ready for a shock when you visit the jewellers!

Indeed, the gold story has been no less spectacular than the more popular stock market bull run. In the last one year, to 18 July 2010, gold prices have risen about 22 percent. It has therefore kept up with the stock market, which has given about 27 percent. In the last five years, gold has given annual returns of about 15 percent - a very respectable performance against the 19 percent given by the stock market. Most fixed deposits have struggled to even give half this figure.

What does it mean for me?

If you are having an upcoming wedding, you unfortunately have no choice but to go by your customs, and buy gold at prevailing prices. But for others, this is a useful time to pause, and start planning for any wedding that may be coming up in the next few years. Instead of leaving all purchases to that time, when gold prices may well be worse than today, there are now simple ways (called Gold Exchange Traded Funds) to purchase gold in small, regular quantities. Best of all, these provide ease of maintenance and extremely low transaction costs.

If you are thinking of gold as an investment, a common mistake is to assume the next five years would be similar to the last five. Gold makes sense upto about 5%-10% of your portfolio, but only if invested in regularly. If you have been out so far, avoid the herd mentality of rushing into gold now after the plot has played out. Instead, use this as an opportunity to start a long term regular investment into gold, preferably using the ETF route.

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