Share Market Vs Gold: Where Should You Invest In 2020?


    From ancient times, people have always taken metals as valuable assets. Gold has been one such form of asset. With the gradual development of the economic system, new forms of investment have come up with equities being the most preferable option. However, this does not diminish the value of gold in today’s world and it continues to remain one of the most sought after alternatives of investment.

    The year 2020 has been a tough year for investment. The surge of COVID-19 pandemic and the radical slowdown of the global economy have made investors rethink about which form of investment would be most suitable for this condition.

    The question preceding whether to invest in the share market or gold is how to create Demat Account. The reason to make a Demat Account springs from the fact that both shares and Gold ETFs (Exchanged Traded Funds) are stored in a dematerialized form in the Demat Account. To purchase or sell shares and gold investments, an investor has to have a Demat Account.

    How To Create Demat Account?

    The simplest way to answer the question of how to create Demat Account is to lay down the simple steps necessary for the opening of Demat Account.

    • You will first have to choose a Depository Participant or DP and the depository with whom you will open a Demat Account. DPs are the agents of the agency called the depository. The purpose of the DP is to act as an intermediary between you and the depository.
    • Once you have finalized on the DP, the next task would be to submit your documents pertaining to your address, identity and income proof.
    • After the verification of the documents has been completed, you will be handed a Dematerialization Request Form or DRF which needs to be filled and submitted along with the shares or gold investment papers.
    • With all these steps being verified by the depository, your Demat Account will be opened within 30 working days with all your investments duly transferred into your Demat Account.
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    With these simple steps, the problem of how to create Demat Account is solved.

    Share Market vs Gold

    After understanding how to create Demat Account the next step is to figure out which form of investment is to be stored in the Demat Account. The subjective factors of compatibility may vary from investors to investors. However, there are certain things to be taken into consideration regarding both shares and gold that may help you come to decide where to invest.

    Price Factor

    Both shares and gold are subject to the rise and fall of prices. The price in the share market fluctuates more than in comparison to gold. In the times of the pandemic, the global economy has tumbled down and the same is being reflected in the share market and the value of the shares. Prices of shares have been falling down rapidly since the beginning of this year whereas the price of gold has soared continuously. The price relation between shares and gold is often inverse. This implies that during times of crisis or inflation value of gold increase whereas that of shares decreases.

    Returns Expected

    Investment in both gold and shares yield returns in the long term. The rate of returns in the share market is relatively greater than in the gold. Therefore, as far returns are expected you will have better returns in stock than gold. However, as the rate of returns is subject to various market conditions, therefore, it is advisable not to pick the right form of investment on the sole basis of the rate of returns.

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    Upon calculation, it will turn out that the rate of return is greater in the shares than in gold.

    Risk Factor

    As far as the returns go shares have an upper hand. However, the risk associated with them is also higher. The fluctuations in the market prices are more volatile than in the case of shares. Gold, on the other hand, enjoys the privilege of being less risky, though at the cost of a lower rate of return. The year 2020 is a fine example of the volatility of shares. The financial recession of 2008 also revealed how much prone to radical fluctuations share markets are. In comparison to that, golds are much safer and rather tend to increase in value in hard times.

    The question of where to invest is something that will be based on these above-mentioned factors. As the price of shares has fallen down, you can buy more shares in less money than you would have been able to previously. With gold becoming dearer, it might seem not feasible for many investors to invest in them right now. To break this deadlock is to understand what is the duration of returns you are setting for your investments. If it is for a short-time, gold seems to be a good option as the crawling economy is favorable to its constant rise in prices. However, if the plan is for long-term investment the more favorable option is share markets. This is because risks are more likely to be balanced out in the long run than in the short one. Whatever option you invest in, with the learning of how to create a Demat Account you can engage in the investment process and buying and selling of shares or gold ETFs in a much more convenient way.

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