As Indians we have an insatiable appetite and flair to own gold, for both emotional and financial reasons. Many of you may be aware that after a recent fall in price of gold, there’s one again been an up-move as many have taken this as an opportunity to flock towards the precious yellow metal for varied reasons. But you got to be careful with whom you dealing with while buying gold and invest in it only the smart way.

Today mis-selling is all over and hence you got to be careful. Recently following complaint of customers being induced by bank employees and other within bank premises to purchase gold coins, gold-related investment products and other wealth management schemes; the Reserve Bank of India (RBI) is looking into sale of gold coins and gold-related investment products of about 30 banks, wherein are they also trying to study their business practices and ascertain whether there indeed exists any mis-selling of such products.

You see, in an incentive driven civilisation there are chances that products may be mis-sold as pressures to perform exist on sales personnel. So, along with the announcement of this probe, the RBI has also said that it has undertaken a thematic study in respect of banks that are active in selling gold coins, wealth management products to examine whether there are systemic issues and to plug deficiencies and legal loopholes, if any.

PersonalFN is of the view that in the world of financial exuberance where rampant mis-selling occurs, the central bank of our country seems to have taken a prudent approach by stepping-up vigilance which has widened the scope of the probe by including systematic issues in sale of gold-related investment products by the banks.

At PersonalFN we believe while you need to allocate towards gold as a portfolio diversifier and to hedge against economic uncertainty (as that prevails at present in global as well as domestic market), it is imperative for you to take responsible decisions and invest in gold the smart way. Gold Exchange Traded Funds (ETFs) are a smart way of investing in gold, as they offer the following benefits:
 

• Convenience
• Quality is uncompromised
• No question of paying premium for buying gold, as you do while buying physical gold
• Low cost (since you don’t pay a steep locker rent to your bank as you do for holding physical gold)
• Correct resale value (very much unlike in case of physical gold holding - especially jewellery where making charges are deducted)
   

But you ought to be careful in selecting gold ETFs and prefer those only which have:
 

• Low tracking error (i.e. the gold ETFs holds more percentage of its assets in gold, rather holding cash); and
• Low expense ratio.
   

PersonalFN believes that, you should consider your investment time horizon and accordingly allocate 10% to 15% of your total portfolio towards gold. Also remember, gold is not an instrument to make quick money but a solid long term asset and hence you should ideally invest in gold with a longer investment horizon.

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Comments
apisan@servidor.unam.mx Oct 16, 2013 Hi Kurt,yer I know, take the finished compounded interest and ad it back into the investment Amount, and re-calculate Thanks for your comment Kurt much appreciated.by the way the calculator isn't my calculator it belongs to that site, Thanks anyway.

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