Hello readers, we are happy to announce that our team of MoneyWiseMind.com launched a new section “Investing Insights: Weekly Q&A for Stock Market Newbies”, to spread the basic stock market knowledge to the beginners.
This
is your go-to resource for demystifying the stock market from the scratch. Each
day, we will present 10 carefully curated questions with answers that will
cover essential concepts, strategies, and terminologies. Whether you have just
entered into the market, or trying to starting your stock market journey, or
looking to strengthen your foundation, our weekly post will guide you through
the basics and beyond, making investing accessible and understandable for
everyone. Happy reading.
Day
45: Basic Stock Market Concept
What are the Different Ways to Invest in Gold?
Physical Gold: Jewellery High making charges (10–35%), low liquidity.
Coins / Bars: Sold by banks/MMTC. 24K purity. 3% GST + storage
risk.
Digital Gold:
Gold ETFs: Trade like stocks (Zerodha /Groww). 0.5% annual
fee.
Sovereign Gold Bonds (SGBs): Govt. -backed. 2.5% annual
interest + tax-free maturity after 8 yrs.
Digital Platforms: Paytm Gold, PhonePe (buy/sell
grams online).
Beginner Pick: Start with Gold ETFs for low cost and ease.
What Does 24K, 22K, 18K Gold Mean?
Karat (K) measures purity:
24K: 99.9% pure (ideal for investment).
22K: 91.6% pure (common in coins / jewellery).
18K: 75% pure (jewellery only).
Key: Higher karat = more pure but softer. Always check
BIS Hallmark (e.g., 22K916) for authenticity.
How is Gold Priced in India?
Gold prices depend on:
1. International Price (USD /oz): Set by
COMEX/LBMA markets.
2. USD/INR Rate: If rupee weakens, gold
rises (e.g., ₹ rises from 75 to 83/$ =
gold up 10%).
3. Local Taxes: 3% GST + 5% import
duty.
Live Example:
Int’l gold: $2,000 /oz
USD/INR:
83 = ₹5,500/gram (vs. $1,800 /oz + ₹75/$ = ₹4,800/gram).
What Factors Make Gold Prices Rise / Fall?
Gold Rises When:
-
Geopolitical crises (wars, pandemics)
- High
inflation
- Weak
stock markets
- US Fed
cuts interest rates
Gold Falls When:
- Strong
economic growth
- Rising
interest rates
- Stable
currencies
Tip: Track US Fed policies – they drive 60% of gold moves.
How to Check Gold Purity Safely?
3- Step Verification:
1. Hallmark: Look for BIS logo + purity
(e.g., "22K916").
2. Chemical
Test: Jewellers use nitric acid (22K
gold won’t tarnish).
3. XRF
Machine: Banks/assay centers scan metal
composition (cost: ₹200–500).
Avoid: Shady shops offering "discounts"
without certification.
What are Sovereign Gold Bonds (SGBs)?
SGBs are
government securities where you buy paper gold:
Interest:
2.5% p.a. paid semi-annually (e.g., ₹2,500/year on ₹1 lakh).
Tenure: 8
years (exit after 5th year via stock exchange).
Tax
Benefit: Zero capital gains tax at maturity.
Ideal
For: Long-term investors avoiding volatility.
How Does Inflation Impact Gold?
Gold is
an inflation hedge:
When
inflation rises, currency value falls → gold priced in that currency
rises.
Example:
India’s
inflation: 6% - Rupee loses 6% value Gold rises 8–10%.
Data:
Gold beat inflation in 80% of 10-year periods since 1970.
What are the Hidden Costs in Gold Investing?
Making
Charges: 10–35% on jewellery (avoid for pure investment).
Storage
Insurance: 0.5–1% p.a. for bank lockers.
ETF
Expense Ratio: 0.5% annually.
GST: 3%
on physical gold.
Smart
Hack: Buy SGBs – zero storage/GST costs.
Gold Allocation: How Much Should a Beginner Invest?
Rule: 5–15% of your portfolio, based on risk
profile:
Conservative: 10–15% (hedges against market
crashes).
Aggressive: 5% (focus on growth assets).
Strategy: Use SIPs in Gold ETFs (e.g., ₹1,000/month) to
average costs.
Never: Park emergency funds in gold – liquidity lags
stocks.
Why should you Consider Gold as a Part of your Investment Portfolio?
Gold shouldn't be your entire portfolio, but a strategic allocation
(typically 5-10%) can significantly enhance diversification, reduce overall
risk, and provide valuable protection against inflation, currency devaluation,
and extreme market turmoil. It acts as a form of financial insurance.
Before investing, assess your risk tolerance, investment goals,
time horizon, and understand the specific costs and risks associated with the
gold investment vehicle you choose. It's often most effective as a long-term
strategic holding within a broader, diversified portfolio.
If you have any
other questions in your mind relating to stock market basics or need any
clarification, please put your query into the comment box, We will try our best
to clarify the same
Disclaimer:
The information provided on MoneyWiseMind is for educational and informational
purposes only. It is not intended to be financial advice, and you should not
rely on it as such. Before making any financial decisions, you should consult a
licensed financial advisor.
