In today’s volatile economic environment, it’s important to put your money in stable and secure saving instruments.
Prices are shooting up, and talks of a recession are growing louder. Inflation is expected to remain at 6.9% until the end of this year – which is higher than the Reserve Bank of India’s target range of 2-6%. Investment analysts Nomura recently said that a recession in the US could impact growth in India in the medium term. Businesses are bound to get affected, and as a result, the stock market will too. While people with long-term financial goals should ‘buy the dip’ the same can not be said for those who are trying to build life savings.
In such a situation, one of the best saving asset out there is gold. Here are five reasons why the yellow metal is the pillar of sustainable savings:
1. You don’t need to be a financial expert to start saving with gold
There are many great saving options out there, but many of them need highly specialised knowledge. For instance, investing in shares is not possible without understanding a company’s balance sheet, its current valuation and its future prospects. Data shows that only about 3.7% of Indians invested in the stock market in 2021.
The same goes for mutual funds, where it is necessary to understand the different allocations made to different sectors in order to gauge the risk factor.
Gold requires no such knowledge. Indians have been putting their savings in gold for literally thousands of years now. Gold is a metal that was used for making coins in ancient kingdoms. It has been passed on as generational wealth in the form of jewellery. Rich or poor, an individual or a nation, everyone inherently understands the value of gold.
Today, digital gold can be bought by anyone anywhere with the simple click of a button. There are no complicated terms and conditions that need to be understood before buying gold. All you need is a phone and an account with a fintech app like Paytm, Gpay, PhonePe or Siply. Microsaving apps like Siply even allow users to purchase 24k gold even for small amounts such as 0.5 gm or 1 gm, and that too at a fixed price of Rs 4500 per gram, a steal considering the current market value of gold.
2. Digital gold has high liquidity
While building a savings portfolio, it is extremely important to consider how much of your portfolio is liquid. Liquidity refers to the ability to convert your financial asset into cash at any point.
For example, a house is not a liquid asset. During an emergency, it would not be possible for you to quickly sell the house and meet your need for cash. Other saving and investment options such as tax-saving deposits, fixed deposits, corporate bonds, and even mutual funds can keep you locked in for several years.
This makes it difficult to access cash during emergencies. On the other hand, digital gold is an extremely liquid store of value. At any point in time, you can redeem your savings in gold in exchange for its value using just your mobile. The cost of the gold will be deposited in your bank account instantly.
What’s more, you can also convert digital gold into physical gold if you require it. Major jewellery player Tanishq also offers digital gold to its customers, which can be exchanged across their stores in India for its physical form. Apps like Siply offer gold delivery to your doorstep at no extra charges. This way, you are saved from the hassle of storing gold. You can choose to get it only when you need it, say, before a marriage in the family.
3. Savings in gold can be as little as Re.1
No matter what your financial situation is, savings don’t need to stop. With microsavings apps, users can start saving in gold for as little as Re.1. You can choose how much money you want to put in gold every day, week and month.
Over time, each rupee adds up, and you can end up with a sizable amount of gold in your name. Gold, a stable and secure saving asset, helps you with long-term wealth creation at a very accessible monthly cost.
Digital gold is also the purest form of gold, it’s BIS certified. Buying gold from lesser-known jewellery stores comes with the chance of contamination or dilution with other metals. With digital gold, you are making a high-quality investment at the price range you’re comfortable with.
4. Gold is for eternity
There are many financial assets which carry the hidden risk of bankruptcy with them. Take equities. Due to fraud or business losses, companies can suddenly go bankrupt. Examples include companies like DHFL, Bhushan Power and Steel and Jet Airways.
This has ended up completely destroying the savings put in by investors in such companies overnight.
Foreign currencies can also carry a hidden risk. For instance, in the months leading up to Brexit, the value of the pound suddenly went down and has stayed down ever since. The pound sterling is now at a 17% discount against the euro compared to pre-Brexit.
Other saving instruments, such as cryptocurrencies, are volatile. Bitcoin, for instance, hit an all-time high of over $68,000 dollars in November last year. Now, it’s at about $21,000, an eye-watering 69% drop.
Even housing price prices have been known to crash in the past.
Gold, on the other hand, is a stable and reliable source of value. You can be rest assured that its value will appreciate over time, or at the very least, stays the same.
5. Gold beats inflation
Gold has returned 10% CAGR since 1971. It has outperformed a number of investment and savings options – from US treasury bonds to commodities and developed market equities.
This means that even when currencies depreciate, gold remains a reliable store of value. Countries across the world hold gold reserves as a means to protect against inflation, deflation and other economic disasters; So, why shouldn’t you?
Experts recommend putting at least 5-10% of your savings into gold. Digital gold is a hassle-free way to develop savings and beat inflation worries.
