Buying gold? Consider this instead... - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

Buying gold? Consider this instead... 

A  A  A
In this issue:
» Deluge of foreign money into India
» IPOs are trading below their offer price
» No food shortage likely
» Seven countries disapprove of Indian Tax laws
» ...and more!!

------- Invest Like Warren Buffett -------
Have you ever wondered how much money you could make by investing in stocks if you simply followed the investment principles laid down by Warren Buffett? A lot of money! So much that you may never ever have to worry about it ever again!

And if you really want to make a lot of money, here's something that will be of keen interest to you - following Warren Buffett's principles is easier than you think... actually, it's extremely easy.

All you have to do is invest in the stocks that we pick...


Meanwhile, the yellow metal gold continues to flirt with its all time high levels. Last heard, it was comfortably perched well above the US$ 1,000 per ounce mark. And it may not be done yet by any stretch of imagination. Experts are of the opinion that it could easily double from here. And that includes Jim Rogers, one of the world's most respected commodity investors. Speaking to Moneynews, the fiery Rogers opined, "If you go back and adjust . . . for inflation back in 1980, gold should be over $2,000 an ounce. In my view it will get there again sometime in the next decade." Please note the last few words. He believes that gold would double sometime in the next decade. In other words, it may have started to look stretched from a near term perspective. In fact, even Rogers is not buying at current levels. But he also mentioned that if it goes down from here, he could once again start buying.

While awaiting a dip in gold prices could be the best thing to do right now, you may not want to do the same for silver and instead start buying today itself. Yes, you've read that right. Taking into account the fundamentals, silver is looking more attractive than gold from a long term perspective. In fact, it has already beaten the yellow metal so far this year, rising three times more than the 17% returns earned by gold. Moreover, the fundamentals of silver seem to be more compelling than that of the yellow metal. As per DNA Money, the amount of silver out there is just 20% of the gold and secondly, silver due to its best in class heat and electrical conductivity and versatility could be used into a lot of applications, thus making it far more useful than just being a storehouse of value. In view of these factors, silver definitely needs to be considered seriously if one has to diversify away from fiat currencies.

00:57  Chart of the day
Of late, there have been talks from several quarters that the world is recovering from the steepest drop in global economic activity since World War II. Recently, the International Monetary Fund has joined the chorus although it admits that the challenge is to sustain the recovery. Today's chart of the day shows that the GDP of China and India is expected to grow in 2009, at a time when the world output will contract led by the US and Europe. In 2010, the situation is expected to improve. However, there is no room for complacency given that the forces that are driving the recovery - major fiscal stimulus, central banks' support for credit markets, and restocking of inventories following the previous large cutbacks in production - might lose potency.

Source: IMF World Economic Outlook, October 2009

The worst monsoon in 37 years had raised concerns over the shortage of food in India. However, according to a top economic advisor to the government, India should not face food shortages even if the monsoons fail next year. The country harvested bumper crops in the year 2007 and 2008 and with the granaries overflowing, there is sufficient buffer stock. As on 1st September 2009, India had 30.1 m tonnes of wheat stocks, up from 23.2 m tonnes a year earlier while rice stocks had doubled from 8.5 m tonnes to 17.2 m tonnes. In fact, the government is expected to free some stock from its warehouses to check rising food prices.

IPOs in India, which were pushed under the carpet when the stock markets plunged, have started resurfacing now that markets have rallied. Given the buoyant mood in the markets, we are hardly surprised at companies wanting to capitalize on this opportunity. The interesting thing, however, is that many of the recent IPOs that have come in the market are trading below the offer price. And this could probably be because the underlying businesses do not have much to offer that can be justified by the price asked for. Investors are also getting savvier and are not interested in investing in IPOs merely for listing gains. This is a wakeup call for other companies lining up to be listed on the bourses as it highlights the fact that a mere revival in the stock markets is not a good enough reason to expect investors to invest in their issues.

Who would have thought around this time last year that the BSE-Sensex would be back to 17,000 levels? Action on the ground, be it factories or construction sites, indicated that we would face some hard times ahead. But the return of foreign investment has changed all that. The net inflow of foreign direct investment (FDI) into India during 2QCY09 has been around US$ 7 bn, nearly twice as much as in the previous six months. Including investments in stocks and bonds, India has received about US$ 15 bn in foreign investment in the quarter, as per the New York Times. In fact, the Indian Rupee has appreciated 11% since the stock market rally began because of rising demand for rupees and the decline in the dollar.

In our opinion, while the macro economic scenario in India remains robust, concerns with regard to investments in education and health care and management of budgetary deficits need to be addressed.

In a move that could be seen as representative of the world's skepticism of India's tax regime, seven major countries, including the US, UK and Australia have come together to expresses their disapproval of India's tax laws. As per reports, they have written to India's finance minister pointing out to the growing unpredictability in India's tax policies and feel that it is creating doubts about India's status as a secure investment destination. The US$ 2 bn tax controversy involving Vodafone's US$12 bn buyout of Hutchison's stake in Hutch-Essar may have acted as a trigger. With India's dire need for foreign capital in building infrastructure, we believe this is one complaint that surely deserves some serious contemplation by the government.

Meanwhile, the Indian markets held on to their gains as buying was being witnessed in stocks from the auto and software sectors. At the time of writing, India's benchmark index, BSE-Sensex was trading higher by about 195 points or 1.1%. As for global markets, Asia was trading in the green, while Europe began the day on a firm note.

04:53  Today's investing mantra
"It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities." - Charles Munger
The 5 Minute WrapUp Premium is now Live!
A brand new initiative of Equitymaster, this is the Premium version of our daily e-newsletter The 5 Minute WrapUp.

Join us in this journey to uncover the sensible way of managing money and identifying investment opportunities across various asset classes including Stocks, Gold, Fixed Deposits... that over time can help you realize your life's goals...

Latest EditionGet Access
Recent Articles:
Were You Lured By Mr Market's Bait?
August 23, 2017
Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?
Why Hasn't Warren Buffett Rung the Bell Yet?
August 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
How Unique Are the Companies You Invest In?
August 21, 2017
One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.
You've Heard of Timeless Books... Ever Heard of Timeless Stocks?
August 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

Equitymaster requests your view! Post a comment on "Buying gold? Consider this instead...". Click here!

14 Responses to "Buying gold? Consider this instead..."


Oct 22, 2009

INVEST in the stocks that we PICK???????/

Guys........advice is always free and good to give.

but u could have done the basics and told us the name of the 10 preferred stocks THAT THE AUTHOR WOULD HAVE CHOSEN IN BSE




Oct 15, 2009

First of all the biggest silver ETF in the world is Ishare just like SPDR is the biggest gold ETF. In india there is no other silver ETF as of now. If one wants to buy silver then one has to go the nearest jewellery shop.
I would like to take the forum as an opportunity to request Equitymaster to start a silver ETF to help common people like us.



Oct 15, 2009

i would like to know about gold & silver etf.



Oct 15, 2009

There is no silver ETF nor silver Mutual fund in the world until now and no one knows the reason for this too.

am following the global silver trends and agree with the write up, that it has appreciated more than gold and can go up a lot more, they say maybe up to USD100 per oz.

What i wanted to ask Eq Master is when one buys physical silver then if and when the time comes to sell it, who would be the buyers? are they shops or commercial enterprises or banks or whom? Appreciate your lucid reply.



N.M.Rajugopal Shreedhar

Oct 15, 2009

Investing in silver certainly seems to be a good idea. Are there any funds in India dealing in Silver/precious metals other than Gold?
I find many have asked this same question, so it gives me a creepy feeling whether anybody is reading all these comments.



Oct 15, 2009

Please see there are many who expect you to give advice on how and where to invest in Silver. That would be of great help from your end to educate the mass - whom you serve with good intention. Thanks



Oct 15, 2009

I think if you have a commodities trading account, you can buy silver in electronic form and need not have it physically with you. However I am not aware of any silver ETF. If anyone has any other idea, please let us know


milind kulkarni

Oct 14, 2009

Is investment in the physical for of silver only option available? OR there are Silver ETFs available like Gold-ETFS?



Oct 14, 2009

I would also interested to know about the silver ETE



Oct 14, 2009

What is the best way of investing in silver

Equitymaster requests your view! Post a comment on "Buying gold? Consider this instead...". Click here!


Copyright © Equitymaster Agora Research Private Limited. All rights reserved.

Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: Website: CIN:U74999MH2007PTC175407