Fool’s Gold – Changing Trends in Investments01 November, 2016
Investing in gold has traditionally been seen as a safe haven for the average investor. Come the festive period, and you see families scrambling to the jewelry shops to make some festive investments. But lately, this trend is changing with the investor becoming more informed and educated about his/her choices.
Investing in gold may seem like a simple and sure shot way to keep your money safe and for you to see high returns on your investments but it is not as simple as it looks. Beyond the shine and the sparkle, there is a lot that goes on in the gold commodities market than meets the eye of the lay investor.
For a lot of people, gold is an emotional and impulsive investment. The gold index is a highly volatile one, largely owing to its association with the US dollar and dependency on the world economy. For this reason, in the past few years, the Indian government has been urging investors against buying gold since India does not produce an ounce of gold. Every piece of gold you buy is imported, so when we buy gold, it may be in rupees, but the government has to spend dollars to buy gold. This increases government spending. If a large group of investors spends money on gold, it is not good for the economy as a whole.
Keeping all of the above in mind, what happens to the investor who wants to capitalize on the prosperity of the season but stay away from gold? It cannot be emphasized enough that the more diversified your portfolio, the safer your money is. There are higher chances of making money off your investments if you have a bouquet of investments and the flexibility to move your money around.
Peer to peer lending is an emerging player in the investment world that cannot be ignored. Peer to peer lending offers high returns of up to 30%, monthly payouts, and flexibility as your money can be spread across a variety of loans based on your choices and needs.
The worldview on gold
According to investment Guru, Warren Buffet, gold is a ‘sterile’ investment. He says
“gold is only useful at protecting purchasing power when the monetary system is in danger. At almost all other times, you’re better off with stocks…businesses…farmland or another productive asset.”This does not mean you stay away from physical investments like gold and real estate completely. It is a well-known fact that an effectively diversified portfolio would include both physical and financial investments, but the proportion of each should vary based on practical reasons such as returns and safety. While gold may have a soothing effect on your mind due to psychological reasons, the fact is that it is a volatile investment and should only form a small part of your investment portfolio.
The below chart shows you the trends in gold prices over the past five years and how gold fluctuates due to changes in the world economy and other macro factors.
Is peer-to-peer lending safer than investing in gold?
To be a wise investor, it is important to know where you are parking your money. In peer-to-peer lending there is absolute transparency in how your money will be invested and your returns are fixed. This makes peer-to-peer investing an increasingly popular investing opportunity for investors across the board.
So this Diwali, avoid the gold rush and explore peer-to-peer lending to see some instant prosperity and growth in your portfolio.