It is important to invest your money in different assets to ensure the generation of adequate returns to sustain not just your retirement but also to carry on with your daily life without inhibitions. Investing activities must always consider your long-term plans and benefits. The major benefits of investing or planning your investments are that you can fight inflation while creating wealth.
To put it in simple terms, risk reduction and wealth creation are the main objectives of investment strategies. While there are many assets you can invest in, a few popular ones would be Fixed income instruments, Equity, Real estate, and Gold.
Apart from being a sound investment for the future, and a significant avenue for investments across the world, gold also remains a preferred investment instrument for Indian retail investors. The love Indians have for gold and jewellery crafted from it is well known. So much so that in 2015, the Government of India launched the Gold Monetization Scheme with an aim to monetise the wealth sitting in the lockers of households. According to a World Gold Council Report, Indian households are sitting on over 25,000 tons of gold. Just behind China, we are the second-largest market for the purchase of gold globally.
The long-term price trend for Gold is positive, and the trend for the future continues to be positive. No other investment class can be worn! and the affinity for Gold continues unabated.
Owing to the loan’s nature of being easy to avail, lower processing costs, quick disbursal and requiring no credit score, the overall gold loan market has grown from INR 600 Billion in FY2009-10 to INR 4610 Billion.
Historically, gold loans have helped embolden people’s ambitions and helped them realize the value of this precious metal during times of crisis and have been an easy source of emergency credit. A recent example of the prowess of gold loans to empower the common man was during the pandemic.
Additionally, the India Ratings and Research report show that major players in the organized gold loan business grew their books by over 20% between March 2020 and March 2021; exhibiting how gold as an asset class gains value during the crisis and makes borrowing against it an attractive option. During this time, gold prices went up, and the government evaluating the economic value of this metal, even increased the LTV (loan-to-value) of gold loans.
It would be worth mentioning here how owing to the quick turnaround time, limited documentation, flexible tenure and repayment plans, digitization and doorstep facilities as compared to banks, NBFCs have gained popularity as the preferred lenders.
As mentioned in the facts above, the price of gold tends to go up when the cost-of-living increases, thereby becoming a good store of value when a currency is losing value. Similarly, this crisis commodity gains value with the decrease in prices of other commodities and essentially acts as a secure investment instrument.
Therefore, to sum it all up, not only is gold a highly liquid investment, but it also acts as a hedge against inflation and deflation, it offers respite both during times of crisis or geopolitical tensions, nothing can fully erode its value and gold offers decent returns in the long-term, investing in gold does not involve a complex review of information as opposed to other assets, and more importantly, if you have this asset, then there would be no greater advantage for seeking immediate funds in exchange for it during any unforeseen circumstance.