Selling gold and investing the cash

Question: My family is from India and we have a substantial amount of gold and gold jewellery that makes up a large proportion of our assets. As the price of gold is at an all-time high I am considering selling some of it and investing it in different ways so I can ensure my family is more secure. Is it a good time to sell and save the cash in a different way?

Answer: Gold is a great asset to have at present with the price having trebled over the past few years, and 2011 is proving to be perhaps one of the best years yet with gold hitting a record breaking high of around $1,700 (Dh6,244) per ounce. You must also remember that gold can fall in price as quickly as it rises. However, the golden rule of sound financial planning is not to have all your eggs in one basket, which at the moment it sounds like you do.

With the price of gold at an all-time high it seems like it's a good time for you to look at other investment and savings opportunities. It would be wise to enlist the assistance of an independent financial adviser who can talk you through the options. You do not say what other investments you already have, but the key areas are life insurance, a retirement fund and education-linked policies for your children. All these policies offer ways for you to achieve your long-term financial goals.

Life insurance will ensure that in the event of your death your family members remain financially supported — whatever the price of gold. Such policies normally pay out a lump sum on your death, which is calculated on the amount you have paid into the scheme and over what time period or as a fixed selected sum. Different investment strategies are available on these policies, ranging from a guaranteed return to a higher-risk policy that potentially offers a much higher return. The bottom line is that life insurance is an investment — it is not dead money and is still an asset that can be used as you want.

Retirement funds and investment plans for your children's education are two other good options. A pension plan allows you to save for your retirement ensuring you have a secure income to live off when you no longer wish to or are able to work. Setting up a fund for your children's education is another way to ensure that money is set aside and available for your family's most important needs.

Each of your children will need an individual fund, which are usually fixed-term, for example spanning from any age up to the age of 17, which could be the age that they start university. At the end of the term the policy provides you with the flexibility to either directly fund the fees, or to take a lump sum.

Before selling your gold, however, you need to make sure you are getting the best price. Check with the various people who would be prepared to buy your gold, for example in the Gold Souq in Dubai. Have the weight and price verified with each potential purchaser and be patient to get the best price.

The writer is commercial director of the Nexus Group. Opinions expressed here are his own and do not reflect that of his organisation or of Gulf News. If you have any questions, please email advice@gulfnews.com