Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP, Multi cap
This is another asset category that people at large are familiar with in various ways. On a regular basis, people consume many commodities, e.g., agricultural commodities like spices; petroleum products such as petrol and diesel; or metals like gold and silver. However, it is not possible to invest in most of these, as many of these are either perishable and hence cannot be stored for long, or storage of the same could take a lot of space, creating a different kind of difficulties.
Though there are commodities derivatives available on many commodities, it may not be wise to call these “investments” for two reasons, (1) these are leveraged contracts, i.e., one can take large exposure with a small of money making it highly risky and (2) these are normally short-term contracts, whereas the investors’ needs may be for longer periods.
On the other hand, there are at least two commodities that many investors are quite familiar with as investment avenues, viz., gold, and silver.
When someone invests in these commodities, the prices are almost in sync across the world. It is easy to understand the prices of gold and silver across countries by simply looking at the foreign exchange rate between the two countries’ currencies, and making adjustments for various costs and restrictions imposed by any of the countries. In this manner, these two are globally accepted assets.
Both these commodities have been used as investments or storage of value for long. In fact, the history of currency would be incomplete without mention of these two. Gold has also been considered by many as a safe haven asset. In case of failure of an economy, or a currency, gold is considered to be the final shelter. However, the opposite camp also comes with very strong arguments. Many currencies across the world were pegged to the gold reserves available with the central bank of the country for long. However, this so-called gold standard has been done away with a few decades ago. And still, most of the central banks hold gold in their reserves.
An investor in these commodities would have to count only on capital appreciation since these do not generate any current income.
Gold and silver come in varying degrees of purity. Each one can be bought at different prices from the market. However, for a large majority of investors, it is almost impossible to make out the level of purity. If we opt for a purity certificate, the cost goes up and without one, the risk of getting lower quality metal is high.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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