Gold Glittering As Ever
The bulls are all securely tied in the pen. The bears are rampaging world markets, not least of all India, hacking ferociously at any attempt by markets to come up from the abyss. Pertinently then, how does one make money in such a volatile market? Every technical support level is being trashed by plunging indices; not an encouraging sign to the potential investor.
Even in such a volatile climate, asset management companies seem to come out with mutual funds that promise the earth, the sky, and everything else in between in a neatly-packed picnic basket. Most of them concentrate on a single sector, the brave few trying the diversified portfolio route.
Though in the long run most equity funds would be a good avenue to invest through, what will happen if volatile conditions remain as the US market moves towards one of its biggest recessions? What should an investor do to still get decent profits?
The one commodity that will retain its luster long-term is gold – that sweet, soft, yellow piece of…well, gold. Although not as significantly and rapidly as the equity markets, gold could be significantly stable throughout the tenure of turbulence.
One domestic firm has recently launched a gold fund that invests in gold equity as well as equity in gold-mining firms. In reality, the fund invests into a gold fund by a parent company in the United States, as in India gold is only traded as a commodity straight up. And there are no gold companies or gold-mining companies listed on our stock exchanges.
A few financial service houses in India have advised their clients not to invest in such avenues fearing that the returns delivered would not be significant. Are their doubts justified?
There is a 35% tax on investments in foreign equity that makes up more than 65% of a fund portfolio. In spite of this, and a 7.5% inflation rate, the gold fund mentioned above gave an absolute return rate...
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