a study on various investment avenues for investors...
TRANSCRIPT
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
22 B. Umakalyani, Dr. N.Kannan
A study on Various Investment Avenues for Investors towards
Gold Investment
B. Umakalyani1,
Research Scholar, SMK Fomra Institute of Technology, OMR, 603 103
Dr. N.Kannan2,
Research Supervisor, Sathyabama University, Rajiv Gandhi Road, Chennai 119
Abstract
In this modern time, the money plays an important role in everybody’s life. Every individual saved from current
consumption for the benefits of future requirements. Saving of people is invested in various assets for fulfilling future
needs. Investment is the commitment of funds which have been saved from current consumption with the hope that some
benefits will be received in the future. Thus it is a reward for waiting for money. Saving of the individual are invested in
assets depending on their risk and return demands, safety money, liquidity, the various alternatives available for
investment in gold through options like jewellery, coins, bullions, ETF, mutual funds, E-gold etc. The present study “A
study on various Investment Avenues for Investors towards Gold Investment” tries to study forms of gold
investment available to investors. The objectives of the study is to understand the various investment options for
investors, factors needs to be aware of and know-how of investing in gold , pros and cons of various forms of investments
and to assist investors in creating awareness about various gold investment options. For the purpose of study the
primary data and Secondary data has been collected. Primary data consists of questionnaire and secondary data
through website, research papers and magazines. Based on the research it is found that many investor still prefer
jewellery, gold coins and gold bullion bars forms of investment and prefer to invest in ETF and Futures and options
which gives more profit and easy form of investment..
Key words: Investment Avenues, Risk & Return, Tax treatment, Gold Investment.
1. Introduction:
1.1 Introduction to gold:
Gold is a comparatively dense, shiny, yellow metal. As an element, gold is quite resistant to corrosion (by
oxygen, but also many other chemicals) .
“Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft,
shiny metal and the most malleable and duct ile metal known.”
In ancient times the value of gold had already been discovered. People took gold to make jewellery and
currency. It is a symbol of wealth, beauty and heritage carrying memories and cultures. However, besides
these, gold also makes significant contributions to a wide range of technologies. Due to its physical
features as corrosion resistance and highly malleable and ductile, gold is being applied in space
exploration, nanoparticle technology, and medicine. Moreover it is also used as the bonding wire at the
core of an iPhone.
1.1 Introduction to gold as an investment:
Gold is considered by many, to be the best investment you can make to protect yourself during
stock market declines and inflation. In fact, history shows that the performance of gold goes up in times of
high inflation. However, the price of gold also has its highs and lows and you could just as easily lose
money investing in gold as with any other investment.
1.2 Factors need to be considering while investing in gold:
(i) Forms of buying gold: any investor has to be aware of the different forms of buying gold. Jewellery,
1 Assistant Professor, SMK Fomra Institute of Technology, IT High way, OMR, 603 103
2Professor in MBA Department , Sathyabama University, Rajiv Gandhi Road, Chennai 600 119
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
23 B. Umakalyani, Dr. N.Kannan
the most traditional and the dominant form of buying gold in India and Bank coins, bullion bars, gold
exchange trades etc are other forms of investment.
(ii) Current income: Gold in any form does not give any current income. The only exception is the
dividend option in the gold ETFs. If held in the physical form, there is only outflow of cash for the
maintenance of lockers.
(iii) Capital appreciation: gold is a very strong bet compared to shares that are highly volatile.
The idea for gold investment will be to use it at times when the markets are falling and when the
inflation is very high.
(iv) Risk: Gold does not carry much risk at least in India, as we hardly see deflation in the real sense.
(v) Liquidity: Gold scores the highest in terms of liquidity, compared to all other
investments. At any time of the day and any day gold can literally be converted to cash. Banks
would give you a jewellery loan (remember though that many banks do not give loans on coins,
including their own), and so would your friendly neighborhood pawn shop.
(vi) Tax treatment: Gold suffers capital gains tax as per the IT Act. So it is better to ask your jeweler for
the bill. Gold does not have any other tax benefits.
(vii) Convenience: Gold scores very high here. But with the per gram price rising, thesmallest
single investment is becoming higher.
1.1 Various forms of investment in gold:
a. Jewellery
b. Gold bullion bars c. Gold coins
d. Gold certifications or deposit scheme
e. ETF
f. Gold mutual funds g. E-Gold.
h. Futures & options.
2.0 Review of Literature
Vidhyashankar S (1990) identified a shift from bank or company deposits to mutual funds due to its
superiority by way of ensuring a healthy and orderly development of capital market with adequate investor
protection through SEBI interference. The study identified that mutual funds in the Indian capital market have
a bright future as one of the predominant instruments of savings by the end of the century.
Lal C and Sharma Seema (1992) identified that, the household sector’s share in the Indian domestic savings
increased from 73.6 percent in 1950-51 to 83.6 percent in 1988-89. The share of financial assets increased
from 56 percent in 1970-71 to over 60 percent in 1989-90 bringing out a tremendous impact on all the
constituents of the financial market.
Sanjay Kant Khare (2007) opined that investors could purchase stocks or bonds with much lower trading costs
through mutual funds and enjoy the advantages of diversification and lower risk. The researcher identified
that, with a higher savings rate of 23 percent, channeling savings into mutual funds sector has been growing
rapidly as retail investors were gradually keeping out of the primary and secondary market. Mutual
funds have to penetrate into rural areas with diversified products, better corporate governance and
through introduction of financial planners.
3.0 Research Methodology
The present study is descriptive study in nature. In this study my objective is to study various options
available for investors in gold investment and to create awareness on various forms of gold investment.
In order to get required information, the information was gathered from the Primary and Secondary
sources. Primary data consists of questionnaire and secondary data consists of information sourced
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
24 B. Umakalyani, Dr. N.Kannan
through various websites, research articles. For the purpose of study data has been collected from
50 respondents in Bangalore and the convenience sampling has been used.
3.1 Statement of the Problem
In India most of the investors invest in gold in the form of jewellery which involves various constraints;
includes high making charges, loss of value, safety issue and storage/ locker charges. The
present study creates awareness among investors in investing in various forms of gold investment.
3.2 Need of the Study
This study is required to know overbought level and oversold level of the Gold price in the Commodity
Market.
It is needed to anticipate a Bullish trend and Bearish trend in the commodity market.
It is essential to know when to buy the Gold and when to Sell the Gold in the Commodity Market
3.3 Objectives of the study
To identify the various options available for investors in gold investment.
To find out the pros and cons of various forms of gold investment.
To create awareness among investors on various gold investment.
Data Analysis and Interpretation
Table 1- Table showing respondent Gender Information
Gender Number of Respondents
Male 28
Female 22
Graph 1- Graph showing Respondents Gender Information.
0
5
10
15
20
25
30
Male Female
2822
Number of Respondents
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
25 B. Umakalyani, Dr. N.Kannan
Inference: The above graph shows 56% respondents are Males and 44% are Females.
Table 1.1 -Table showing most preferred investment options among 4 Metals
Metal Number of Respondents Percentage
Gold 23 46
Silver 14 28
Platinum 8 16
Diamond 5 10
Graph 1.1-Graph showing most preferred investment options among 4 Metals (In percentage)
Inference: The graph shows 46% of investors prefer to invest in Gold than Silver, Platinum and
Diamond and the second preferred investment is Silver.
Table 1.2-showing willingness to invest in Gold
Yes 45
No 5
46
28
1610
0
5
10
15
20
25
30
35
40
45
50
Gold Silver Platinum Diamond
International Journal of Engineering Technology, Management and Applied Sciences
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26 B. Umakalyani, Dr. N.Kannan
Graph1.2-Graph showing willingness to invest in Gold
Inference: 45 Respondents i.e. 90% of investors are willing to invest in gold and only 10% respondents
a r e not willing to invest in gold.
Table 1.3-Table showing most preferred form of Investing in Gold
Jewellery 18
Gold Bullion Bars 7
Gold Coins 9
Gold certificate 2
ETF 5
Gold Mutual Fund 4
E-Gold 3
Futures and Options 2
Graph 1.3-Graph showing Table showing most preferred form of Investing in Gold
45
50
10
20
30
40
50
Yes No
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
27 B. Umakalyani, Dr. N.Kannan
Inference: Based on above graph 36% of investors preferred option of investing in gold is Jewellery,
14% and 18% in Gold Bullions Bars and Gold Coins, only 4% investors are aware of Gold Certificate
and Futures and Options, Gold Mutual Fund, E Gold and ETF are very marginally preferred form of
investment.
Table 1.4-Table showing pros and cons over Gold Jewellery Investment
Pros
Convenience 26
Fashionable 14
Usage purpose 10
Cons
Making charges 43
Loss of value 5
Safety issues 2
Graph 1.4-Graph showing pros and cons over Gold Jewellery Investment
Inference: Based on above graph 26 respondents invest or purchase in Jewellery due to convenience
and prefer constraints in investing in gold is making charges.
Table 1.5-Table showing pros and cons over Gold Bullion Bars
Pros
Easy form 7
Purity 39
Accessibility 4
Cons
Safety 6
Storage charges 6
Denomination 38
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
28 B. Umakalyani, Dr. N.Kannan
Graph 1.5-Graph showing pros and cons over Gold Bullion Bars
Inference: Based on above graph 80% of respondent preference to invest in gold bullion due to
purity of gold and 80% feels the gold bullion bars will be available with 10 gm and above which may
not suitable for all types of investors.
Table 1.6-Table showing pros and cons over Gold Coins
Pros
Easy form 35
Moderate loss value 10
Denomination 5
Cons
Safety 24
Storage charges 13
Making charges 13
Graph 1.6 Graph showing pros and cons over Gold Coins
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
29 B. Umakalyani, Dr. N.Kannan
Inference: 70% of respondents prefer to invest in gold coin due to easily available and 20% feels
moderate loss value and available in lesser denomination. 48% feels gold coins are not safe involves
some making charges and storage charges.
Table 1.7 Showing pros and cons over Certificate/Deposit Scheme
Pros
Safety 47
Purity 3
Cons
Less return 28
Amount of investment 22
Graph 1.7 Graph showing pros and cons over Certificate/Deposit Scheme
Inference: From the above graph it is observed that 94% of investors prefer to invest in gold
certificates due to safety and feels that it gives less return and the amount of investment required is not
affordable.
Table 1.8 Showing pros and cons over ETF
Pros
Easy 48
Purity 2
Less transaction cost 0
Safety 0
Cons
Knowledge 42
Delivery 8
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
30 B. Umakalyani, Dr. N.Kannan
Graph 1.8 Graph showing pros and cons over ETF
Inference: Based on above graph 96% of investors feels that investment in ETF is very easy form of
investment as it does not require physical form and require proper knowledge to gain access to the
market.
Table 1.9 Showing pros and cons over gold Mutual Funds
Pros
Easy 10
Professional management 30
Less transaction cost 10
Cons
Risk 45
No control 5
Graph 1.9 Graph showing pros and cons over gold Mutual Funds
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
31 B. Umakalyani, Dr. N.Kannan
Inference: 60 % of respondents feel that mutual funds are professionally managed and give more
advantage and profit and also feel it is very risky due to market uncertainty.
Table 1.10 Showing pros and cons over E Gold
Pros
Easy 27
Purity 9
Less transaction cost 5
Safety 9
Cons
Knowledge 10
Delivery 40
Graph 1.10 Graph showing pros and cons over E Gold
Inference: Based on above graph 54% of respondents feels that it is very easy form of investment and
constraints is there is no physical delivery and the delivery charges are high.
Table 1.11 Showing pros and cons over Futures and Options
Pros
Easy 10
High exposure 31
Less transaction cost 9
Cons
High risk 45
Over trading 3
Wrong calls 2
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
32 B. Umakalyani, Dr. N.Kannan
Graph 1.11 Graph showing pros and cons over Futures and Options
Inference: Based on the above graph respondents prefer to invest in futures and options due to high
exposure and less margin and feels that future and options are high risky form of gold investment it may
erode your capital in few seconds.
5.0 Summary of Findings
The data were analyzed using statistical tests that have been described earlier and the results drawn based on
these tests are given below:
46% of investors prefer to invest in Gold than Silver, Platinum and Diamond and the second preferred
investment is Silver.
36% of investors preferred option of investing in gold is Jewellery, 14% and 18% in Gold Bullions Bars
and Gold Coins, only 4% investors are aware of Gold Certificate and Futures and Options, Gold Mutual
Fund, E Gold and ETF are very marginally preferred form of investment.
52% of investors invest or purchase in Jewellery due to convenience and prefer constraints in investing
in gold is making charges.
80% of respondent preference to invest in gold bullion due to purity of gold and 80% feels the gold
bullion bars will be available with 10 gm and above which may not suitable for all types of investors.
70% of respondents prefer to invest in gold coin due to easily available and 20% feels moderate loss value
and available in lesser denomination. 48% feels gold coins are not safe involves some making charges
and storage charges.
94% of investors prefer to invest in gold certificates due to safety and feels that it gives less return and the
amount of investment required is not affordable.
96% of investors feels that investment in ETF is very easy form of investment as it does not require
physical form and require proper knowledge to gain access to the market.
60 % of respondents feel that mutual funds are professionally managed and give more advantage and
profit and also feel it is very risky due to market uncertainty.
54% of respondents feels that it is very easy form of investment and constraints is there is no physical
delivery and the delivery charges are high.
Investors prefer to invest in futures and options due to high exposure and less margin and feels that future
and options are high risky form of gold investment it may erode your capital in few seconds.
International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com July 2016, Volume 4, Issue 7, ISSN 2349-4476
33 B. Umakalyani, Dr. N.Kannan
6.0 Conclusion
In the current market scenario of high volatile, rapidly changing market place, various avenues for
investment in gold are creating the confusion among the Investors. As per various studies 16,000 tons
of gold is there in Indian households predominantly in the form of jewellery.
There are various alternatives available for investment in gold through options like jewellery, coins,
bullions, ETF, mutual funds, E-gold etc. The present study “A study on various forms of gold
investment” tries to study forms of gold investment available to investors.
The objectives of the study is to understand the various investment options for investors, factors needs
to be aware of and know-how of investing in gold , pros and cons of various forms of investments and to
assist investors in creating awareness about various gold investment options.
For the purpose of study the primary data and Secondary data has been collected. Primary data consists
of questionnaire and secondary data through website, research papers and magazines.
Based on the research it is found that many investor still prefer jewellery, gold coins and gold bullion
bars forms of investment and prefer to invest in ETF and Futures and options which gives more profit and
easy form of investment.
NOTES AND REFRENCES
1. Vidhyashankar S, (August 1990) “Mutual Funds: Emerging Trends In India”, Chartered Secretary, Vol. 20(8), ,
pp.639-640.
2. Lal C and Sharma Seema, (December 1992) “Mutual Fund-A Buoyant Financial Instrument”, Finance India, Vol.
VI (4), pp.811-18.
3. Sanjay Kant Khare , (January 15, 2007) “Mutual Funds: A Refuge for Small Investors”, Southern Economist, ,
pp.21-24.
4. “About Gold-ETF”. nsegold.com.
5. “Gold: A commodity like no other”,World Gold Council. Gold.org
6. Tiddie.com, An Introduction To Gold As An Investment, 26th May 2013
Bibliography:
www.indiamoney.com
www.goldapproximity.com
www.profitndty.com