Easy Guide: How to Start Investing in ETFs for Beginners Part 2
This is part 2 of the ETF Investing Series, where we will discuss the GOLD and SILVER ETFs and how to invest in them, including how they work. What’s the significance of investing in these instruments? All this we are going to cover in this part. I request you all please go through part 1 for more clarity .
HOW GOLD AND SILVER ACT FOR OUR PORTFOLIO
As I mentioned in previous posts that, we are Investors and we are playing in the cash market, so we are supposed to go long usually we do this in the bull run ,but what should be there in the Bear markets. Is there any opportunity where we can go long and the answer is YES, we can go long in the case of ETFs.
INSURANCE OF THE PORTFOLIO
We know that when the markets fell at that time the precious metals like gold and silver are in the bullish trend as they are the DEBT instruments, which acts opposite to the market trends (i.e. When markets down, the gold and silver are at the up side). So here we can add the returns for our portfolio in the tense times as well.
Gold is a kind of protection against the recession, not only we people but also the Banks, the RBI are investing a huge capital in gold. It is a precious metal, and it is respected, though it is not used in Industrial Applications.
Whereas the Silver is different, it is a precious metal and also has Industrial Applications (In the case of Electric Vehicles, the Battery is the important element that drives the vehicle, and for its manufacturing, Silver is required ). So, one more plus point for the silver. Both of these metals are traded in the markets in the Futures and Options Segment, Silver is very volatile in nature, and so trading can lead to losses, so the best option is of ETFs where the risk is minimised and we can invest in these instruments same as like SIP and can generate massive wealth from it.
The Experts suggest that there should be a (10 to 15%) capital allocation for the Gold as in simple words it acts like a cushion for your Equity Portfolio and prevents the bleeding of the portfolios in less times.
IN THE WAR SCENARIOS
The Stock Market gets affected due to unexpected situations like WAR, and the Equity Portfolio gets disturbed at that time. Gold is on the rise, and so are DEBT instruments, such as Gold, are rising. The crude oil is also rising as its nature is opposite to the market trends, but ideally, the Gold has performed far well in the past and will continue in the Future.
GOLD RETURNS
The above chart is of MCX GOLD FUTURES, as this is the main chart through which we can track the action of gold. The chart is of the Monthly time frame, which shows the massive jump in the year-on-year.
GOLD AND THE NIFTY CHART
As we can see, the Blue coloured line it is of Gold, and the other is the NIFTY 50 ,So the clear cut idea which we can see from the chart is that gold is a kind of hedge in the fall period of the markets as highlighted in the image. So our investment is the smart one and of low risk and high returns in the long term .
WHY THE ETFs ?
There are several ways of investing in the gold such as
- PHYSICAL GOLD
- DIGITAL GOLD
- GOLD MUTUAL FUND
- GOLD ETF
The conclusion is that the PHYSICAL GOLD is in the safe for a long duration, and when we want to sell it, then we get only the 80 to 90% amount in hand in case of the DIGITAL GOLD it doesnn’t generate any big returns as it proves to be quite costly in the long term and a huge amount of money is deducted in the hidden charges.
Then the GOLD MUTUAL FUND can create massive wealth, but again, the minute difference in the returns on a yearly basis of the GOLD MUTUAL FUND and GOLD ETF seems to be very minute, but in the long term, the minute difference can turn into huge returns. So, the most beneficial is the GOLD ETF.
ANALYSIS OF THE ETFs
AUM
The AUM should be as high as possible, because no any kind of liquidity issues, and in this,, the scheme having a larger AUM depicts the confidecne of the investor on that particular scheme so safety is the first priority in investing.
EXPENSE RATIO
It should be as less as possible but always prefer the one who is elder in the markets (i.e. the scheme which is quite old enough and if it is asking a penny more then why not ?) as it clearly depicts the confidence of the investor and if the investors are more definately the AUM is the higher and so they are asking for a some how more expense ratio and it is acceptable.
An expense ratio less than 1 is considered a good investment.
As you can see the detailed analysis is made as per the above criteria I hope you got this ETF investing .
See you in the next post
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Check out the other posts as well –
Is stock market investing worth it (Link) https://bullishblogger.com/is-stock-market-investing-worth-it/
Sip and Swp Secret of Infinite Wealth (Link) https://bullishblogger.com/sip-and-swp-secret-of-infinite-wealth/
