The upheavals resulting from the COVID-19 pandemic have disrupted economies. The changed situations call for a change in the investment philosophy. Investments play a major part in global finance. Anything that is saved for later wealth creation is an investment. Let us have a brief look at the options available to you under the present circumstances.
Gold
Investment in gold is ideal in our time given the financial value and investment opportunities of the yellow metal. Many an investor has switched to gold as a safe bet recently because of the slide in equity markets and the downfall of the realty sector. That change in preference is reflected in the rising prices for gold.
Most of these new buyers are likely to sell gold once equity markets and the realty sector rebounds from the current depths. In other words, gold may not always be a hot favourite. The slide of the rupee against the dollar also impacts the price of gold.
The gold bond scheme introduced by the central government with an eye to reducing gold consumption and gold import into the country has found many takers. This is proof enough that gold is increasingly seen as an investment in India.
An investor can buy gold as little as 1 gram to as much as 4 kilograms under the gold bond scheme in a financial year. These bonds can be bought from banks, post offices, markets and the Stockholding Corporation of India. The scheme becomes all the more attractive because investors are assured of 2.5 percent tax-free interest on their investment apart from the price increase of their investment in gold. Though the bonds have a fixed term of eight years, investors have an option to sell them after five years.
After completing the term, the investors can convert the bond to cash in accordance with the then market value of gold. A sovereign of gold cost Rs 13.75 on March 31, 1925. In 2020, that much gold costs Rs 42,000. Though there was a considerable dent in the sales of gold ornaments this year, compared to the previous year, the lower demand has not proportionately affected prices.
Equities
Stock markets have a significant role to play in economic growth. Equities are motivating to the investors. Every investor is looking to grow their investment. The right investment will pay off in the long run. The wise thing to do is to invest in the right stock at the right time. The fundamentals of a company should be rigorously studied before buying into it.
In these challenging times, it is only natural for stock investments to decrease in value when the economy is caught in a backfoot. However, they will claw back to their prime in the long run. Though stock markets have a huge potential, only about 1.5 per cent of the population is directly invested in stock markets. A larger participation could revive the economy.
Cryptocurrency
Cryptocurrencies, developed through blockchain technology, could be a safe and profitable investment method in future. Judging by the current investor enthusiasm, cryptocurrencies have the potential to become the most accepted investment in the world. Yet, we need more studies about the new currency.
A judgment by the US federal court on July 24, 2020 has some valuable insights about the future of cryptocurrencies. Hearing a case related to moneylending, the court has observed that Bitcoin is widely seen as a form of money. Bitcoin is being defined as a means of transaction and a store of value. All these point to the futuristic opportunities of cryptocurrency.
(The writer is an assistant professor of the Mar Augusthinose College, Ramapuram. Views are personal.)