Why and how much to invest in gold

Every investor and even a layman knows that it's extremely safe and stable to invest in gold. However, why is there a sense of stability and security when it comes to investing in gold. Apart from that investors are generally confused when it comes to composition of gold in their portfolios. Whatever the case it is a must to have gold in your portfolio. Today I will try to answer some of these generally asked queries.

Why Invest in Gold?

Since time immemorial gold is seen as a commodity of immense value and is attached with social status. It is used in making jewellery, dentures, electronic circuits & equipments, industrial catalysts and what not. This has driven it's market price through the roof. Barring few lows gold has always performed well. During economic downturn or recession gold is the best hedge against eroding financial & notional investments. The reason is gold is something physical and real which has real value. This is the very reason various central banks are hoarding gold for last 3-4 years or since 2008 U.S. recession. When economy is not performing well investors look out for stable and secure investments, it is the time when they lap up gold at any price.  This is precisely the reason why gold prices shoot up like anything during recession. Another reason worth looking up is that gold reserves are dwindling down with each passing day. With demand increasingly going up and supply going down, gold prices are nowhere going to stay where they are. You can invest in gold either by purchasing physical gold bars from financial institutions or by purchasing it indirectly through Gold ETF or GETF.

Why and how much to invest in gold

How much to invest in Gold?

Having gold in your portfolio is good but don't overdo it as you need to diversify across asset classes in order to generate a consistent and fair amount of return. Gold is basically included to give your portfolio a safety net just in case it is not performing well. Ideally an allocation of 10-20% is more than enough to save you of any considerable fall in your notional investments. If you are thinking to buy physical gold then prefer gold bars rather than jewellery as gold jewellery looses it value over a period of time due to adulteration & wear & tear. But physical gold beyond a level attracts Wealth Tax in some countries like India. Apart from that gold needs to be stored and taken care of. So considering these factors I would advise you guys to invest in Gold mutual funds and ETF's. They are safer and does not attract any wealth tax. 

Whatever the decision you take don't just blindly jump into gold bandwagon as different assets perform well in different times. Last 4-5 years belong to Gold. So stay focused keeping in mind your ultimate investment objective and invest accordingly. 

What are "Direct Mutual fund" plans?

Recently the Indian capital market regulator SEBI or Securities & Exchange Board of India announced plan to introduce Direct Mutual fund plans  from 1st January 2013. Reacting to this announcements some of the fund houses have either increased or tweaked the exit loads for some of the mutual fund schemes. On top of that some of the investor who wish to invest in direct plan (through transfer) are made to pay the exit loads, whereas others are simply allowed without paying a dime.  The simple logic behind this is the time duration for which investor  remained invested in the fund and the mode of application. If you applied with the AMC directly prior to Jan 1 then you need not pay any exit load to transfer to Direct plan. On the other hand if you invested through an agent then you need to pay the exit loads prevalent at that time.

Must Read: How much to invest in mutual funds?

What is a Direct mutual fund plan?

A direct mutual fund plan is one in which you directly approached the asset management company (AMC) or mutual fund house and invested with them without the help of any agent or broker. This non-intervention of intermediary leads to lesser expense ratio for the fund hence a slightly higher NAV or net asset value.  However the normal plans will continue to be distributed through brokers & distributors.

So from this article it's pretty clear that not all investors end up paying the same exit loads. This depends on the date on which we invested and entered in the contract with the AMC. Even if the AMC changes the exit loads during the course of time, you are only bound by the exit loads mentioned in the schemes offer document. So the next time you plan to invest in a new mutual fund don't forget to invest some time reading the offer document and acquaint yourself with the various charges associated with the scheme. SEBI has always protected the investor rights and direct plans are another step in the right direction. 

How to get rid of Credit card bill (debt)

New York based 35 year old Cindy Bigelow, an executive with a talent search firm is in a dilemma these days. She had been regularly paying her credit card bills on time for the last 10 years. But all of a sudden she found herself struggling to get out of credit card debt trap. She is going through some serious financial problems these days due to which her finances have beet hurt badly. She barely managed to escape the default on payment by paying the minimum amount due. She is desperately looking for various ways to get out of this credit card debt. 

Cindy is not the only one to have suffered this situation. Since the onset of financial meltdown back in 2008 more and more credit card customers are defaulting on their payments. This has been caused by lesser employment opportunities and hence decreased potential to pay back the debt. In a nutshell, default happens when the outflow (spending) exceeds the inflow (income).  One can easily get into a credit card trap with increasing interest burden, but one can get rid of it with meticulous planning. Below are some ways to get rid of that sky rocketing credit card bill:

Get rid of credit card bills

1. Pay credit card bill through EMI: If you are looking to buy something, try to get it on a EMI or equated monthly installment. Mostly these offers are available with some card processing fee which gets credited back to your account in the next billing cycle. But what if you have swiped your credit card for that big purchase in one go? Don't you worry! Banks are more than willing to convert your lump sum credit card payments into equated monthly installments at affordable rate of interest. Just call up your banks helpline and ask about all the EMI options available on your credit card. Apart from that some banks provide links on their internet banking for the same.
2. Pay Credit card bills through Personal Loans: If you don't pay up your credit card bill on time, banks will usually levy interest charges between 15-40% per annum to roll it over to next month. To solve this problem all you have to do is take a personal loan, loan against gold or property. Gold loans are considerably cheaper then personal loans. Banks are readily to give you a personal or other loan to get rid of that sticky credit card loan. All you have to do is to call your respective bank customer care number or visit the nearest branch. But don't default on your loan as it could seriously dent your credit score. 
3. Transfer the balance: Banks these days allows its customers to transfer balance of one card to other. There are two options given by he banks here: fixed period option & lifetime payment option. IN case of fixed period option you will be given a period of 3-12 months to fully pay back your debt. During this period bank charges a lower rate of interest which varies from one bank to other.Apart from that if you further miss in your payments then bank will start charging normal rate of interest. Lifetime payment option as the name suggests one gets allows you to pay the dues as per your convenience, but the charges will be on the higher side. Once all the formalities are completed bank offer the customer with a check or demand draft to pay off the credit card dues.
4. Negotiate with the bank: No bank wants to add more non performing assets (NPA's) to it's balance sheet.  Try to explain your scenario to concerned bank official and ask him/her to provide you with more liberal payment schedule and interest rates. Eventually bank will soften the interest rate for you.

How to open a savings account online

Technology has changed the way we used to transact. A visit to bank branch has been replaced with swiping the debit card at the nearest ATM vending machine. You can invest in mutual funds as well as do your future financial planning online these days. On the same lines some of the leading banks have made account opening process online. State Bank of India, Kotak mahindra bank and Yes Bank re now allowing customers to open up online savings account. With RBI and the government receptive to opening up of banking sector more banks are expected to follow the suit very soon.

How to open a Savings bank account online: 

For opening a bank account online you have to visit  the bank website & click on the relevant link.  Yes bank recently launched a service "Yes Touch" to assist new customers in opening new accounts.  Here is a link to open Yes bank account online & here is a link to open kotak mahindra bank account online. On bank's website you will be sent to an online form which requires you to fill relevant information like name, phone number, address, PIN number of your locality, preferred branch, email etc. Once you submit these details message containing an authentication code will be sent to your mobile phone. This step is basically meant to verify your credentials.  Immediately after entering the verification code you will receive another message containing a reference number which can later be used to carry out other transactions. 

Open a online bank account

Verification Process:

After you have filled all the relevant information online, now you need to provide relevant document copies as proof to the information you have provided. This is required to complete the KYC norms as has been laid down by the RBI. Yes bank provides you with the convenient option of uploading the document online. Kotak Mahindra Bank doesn't provide with the option to upload but sends it's employee to your home to collect the same. State bank of India on the other hand only allows you to fill the form online but you have to visit the branch to submit your documents & photographs.

This is meant as guide for you to open up an online bank account not an exhaustive method to do the same. Please feel free to ask more questions and give your suggestions.