investment properties n gold paper

8/3/2019 Investment Properties n Gold Paper

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INVESTMENT

PROPERTIES


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Definition:

A property that you buy with the purpose ofgenerating financial returns is called an investmentproperty. This property could be land, a singleapartment or house, a block of flats, a commercial orindustrial building.Investment properties generate rental income, capitalgrowth or both.

Investment properties are generally not used forresidential purposes.


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Real Estate Investing:Real estate investing involves the purchase, ownership, management,rental and/or sale of real estate for profit. Improvement of realtyproperty as part of a real estate investment strategy is generallyconsidered to be a sub-specialty of real estate investing called realestate development. Real estate is an asset form with limited liquidityrelative to other investments, it is also capital intensive (although

capital may be gained through mortgage leverage) and is highly cashflow dependent. If these factors are not well understood and managedby the investor, real estate becomes a risky investment. The primarycause of investment failure for real estate is that the investor goes intonegative cash flow for a period of time that is not sustainable, often

forcing them to resell the property at a loss or go into insolvency. Asimilar practice known as flipping is another reason for failure as thenature of the investment is often associated with short term profit withless effort.


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Benefits:

Investment in property is usually prone to less volatility than shares.The investment in this sector is relatively a safe form of investment.

The value of your property rises in the long term.

You become eligible to receive tax deductions. You can includedepreciation in the value of the investment property due to wear, tear andobsolescence as deductions in your tax returns.

You can obtain tax variations and enhance your cash flows.

You can earn from the rental income.

You can make use of negative gearing. A negatively geared investmentproperty is one in which the interest on the property loan is higher thanthe rental income derived from the property. By indicating the differencebetween the interest and the rental income as losses incurred on theinvestment, you can get deductions in your tax returns. This is the legalremedy to reduce your taxes.


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GOLD PAPER


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WHAT IS GOLD ETF?Gold ETF, also known as paper gold, is an open-ended mutual fundscheme that invests money in standard gold bullion that has 99.5per cent purity. Investors in gold ETF will have their investment in

the form of units of the scheme that are listed on stock exchanges.Each unit of the investors holding will typically represent one gramof gold. However, there are ETFs with lower denomination too.While jewelry is seen to perform dual function used for aestheticpurpose and investment in times of crisis it may not be the mostpreferred form of investment. At the time of sale, one does not

usually get the full price of gold. If you're looking at gold purelyfrom an investment perspective (asset allocation), it may well beworth to explore gold exchange-traded funds (ETFs) a productintroduced in 2007.


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FOR INVESTORS:For small investors, it makes sense to invest in a gold exchange-traded fund (ETF). Gold ETFs invest in physical gold. The fundstrack the price of gold. The ETF route saves the investor frompurchasing and keeping gold. You can buy and sell gold on

stock exchanges at the wholesale price with good liquidity. Eachunit of a gold ETF represents one gram of gold. You need tohave a demat account to invest in a gold ETF.Gold ETFs provide investors with a means of participating in thegold bullion market without taking physical delivery of gold,and to buy and sell that participation through the trading of asecurity on the stock exchange. A gold ETF is a passiveinvestment. So, when the gold price moves up, the ETFappreciates and when it moves down, the ETF loses value.


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INVESTMENT IN PAPER GOLD:

India is the largest consumer of gold. The yellow metal has always been a

fascination for us. Indians naturally have a craze to possess more andmore gold. The gold accumulated by families goes unaccounted. Nowinvestments in gold has taken a new form which is free from the risk ofholding physical gold.

One of the latest trends of investments include Gold Exchange Traded

Funds. These are Exchange Traded Funds based on the price of gold. ETFwas first introduced in Australian Stock Exchange in the year 2003. Theconcept was first approved in India in the year 2007.


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Gold Exchange Traded Funds in India:Presently there are seven Gold Exchange Traded Funds registeredwith Bombay Stock

Exchange/ National Stock Exchange.

Gold Bees

Reliance Gold

Kotak Gold

Q Gold Half

Religare Gold

SBI GETS

UTI Goldshare


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Here investment is done in units. Each unit is one gram gold of 24carat. So the price of each unit will be the price of one gram ofgold. Gold and stock market conditions are always inverselyproportional. So investors who own the fund can sell the units at abetter price when GETF is traded at a higher price and buy equity

shares of reputed companies with strong fundamentals. Againwhen the market prices for the company improves it can be soldand again GETF can be purchased if it is at a lower price.

Systematic Investment Plans (SIP) is also available. By making useof this facility one can invest very small amounts regularly so that

the whole amount accumulates to give a reasonable amount. Bydoing so, the buying price can also be averaged.


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Advantages:Investments can be done with smaller amounts like Rs.2000/-

The general trends in the stock market will not affect this fund.

The price depends on the gold price in the international market.

There is less risk in investing in GETS than equity shares.

It is less volatile.

It can be used for online stock trading.In the present scenario where physical gold prices are too hot andthe share markets are tumbling, Gold ETF is a better option forinvestment.


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IS REAL GOLD OR PAPER GOLD A BETTERINVESTMENT?Real tangible gold is somewhat more secure and paper gold may be aquicker means of making a short term profit in the gold market.Holding real gold or paper gold depends upon investment strategy.

Real gold is gold bullion. Gold bullion coins such as the Americaneagle and gold bars from well-known sources such as JohnsonMatthey are trusted means of holding gold bullion. Taking delivery ofthese gold bullion products is the ultimate in security. They also havea worldwide market when the investor wishes to sell.

Real gold also includes certified rare gold coins. These oftenoutperform gold bullion over the years and can be used as long terminvestments. However, the value of these items is much more closelytied to their rarity than to their gold content.


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Gold mining stocks are a useful way to profit from the price of gold.

When the price of gold is going up mining stocks will often outperformgold bullion. The risk of owning gold mining stock is the risk of owningstock in any business. Thus a mining companys stock may go up when itfinds a new vein of easy to mine gold or down if it is forced to close downa mining operation because of environmental concerns

The ultimate in paper gold are the gold funds that try to track the price ofgold. The investor buys shares in the company whose assets are goldbullion and cash. The value of the shares goes up when gold goes up anddown when it goes down, minus the profit to the company. Holdingshares in a gold fund can be a quick and efficient way to profit from the

rising price of gold. As with other stocks the investor can buy or sellquickly, paying a commission but not paying for or taking the time fordelivery. There are, however, costs to running any business, and in buyingand selling stock, that come off the bottom line and can make paperinvestments much more complicated than their physical metal equivalent.


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BIBLIOGRAPHY:
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investment properties n gold paper

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