ETFs are ideal for market beginners who are enthusiastic about gold investments. This is because after opening a brokerage account, they get 24x7 AI assistance on which ETF can be best for them. Moreover, investors can monitor live trading prices anywhere they want and eliminate administrative costs. Finally, their holdings stay secured under the supervision of top-rated companies that share high-volume trading expertise.
What Are the Different Ways to Invest in Gold?
People in India prefer buying gold due to its flourishing demand that seldom fades away because of market turbulence. Moreover, apart from an investor’s perspective, purchasing physical gold is considered to bring good luck as per Indian customs.
If you are a conscious investor looking forward to safeguarding your investment portfolio against unforeseen events, this article explains how to invest in gold to enjoy significant margins. Read along to know more.
5 Best Options to Invest in Gold
Generally, gold investments can be classified into two categories. Either you hold it in physical form, i.e., in the form of coins or jewellery, or you invest in digital gold. Presently, the latter option is most preferred by investors as it saves storage costs and designing charges associated with a jewellery purchase.
Here you will read about how to invest in gold through digital means:
1. Sovereign Gold Bonds
The Indian Government has periodically released these gold bonds since 2015. You may buy these underlying gold assets as an alternative to physical gold. The GOI guarantees the payout of accrued wealth in cash as per the current price of gold after the term expires.
Sovereign Gold Bonds (SGBs) come with a lock-in period of 5 years and are much more reliable as the funds are monitored and regulated by RBI. The Government announces the sale of sovereign gold bonds in batches, typically for 2-3 months within a year. You can purchase them during this period via any leading bank or get hold of some previous issues listed in secondary markets.
2. Gold ETFs
Similar to shares of listed companies, gold exchange-traded funds are also available for buying and selling via a brokerage platform. However, shares of gold refining/mining firms and actual gold are the predominant assets covered by ETFs.
If you are enthusiastic about buying gold ETFs, you need a Demat account to start investing. By buying ETFs, you can avoid the hassle of owning this precious metal in its physical form. Moreover, by analysing different ETFs, you gain more progressive ideas on investing in gold with sufficient exposure to the market.
3. Gold Mutual Funds
Gold mutual funds include shares of various companies that primarily deal with gold. In simple terms, these mutual funds mainly consist of several gold ETFs managed under an umbrella by an AMC (Asset Management Company).
You can buy gold mutual funds if you wish to begin with a slightly lower risk profile but also have to bear a margin as the fund manager fees. The primary advantage of this kind of investment is you may go passive for a while and do not need to worry about gold’s performance in the market day in and day out.
4. Digital Gold
Various online platforms backed by bodies like MMTC PAMP, Augmont Goldtech and SafeGold are authorised to sell digital gold in India. You can buy them in tiny denominations, even less than 1 gram.
Those searching for how to invest in gold with a pocket-size budget can start with this option. Also, you can make payments easily through UPI platforms, and the entire process is cashless.
5. Gold Schemes
Jewellery companies offer gold-saving schemes where you need to deposit a monthly sum for a certain tenure and finally buy jewellery with the accumulated wealth at the end of the term. To make these schemes attractive, the jeweller often comes up with added perks where the making charges are waived off, or the company provides one month’s extra instalment as a bonus when buying jewellery from them.
In this discussion on how to invest in gold in India, we have listed five diversified investment alternatives for potential investors. They all vary regarding liquidity, acquiring costs, estimated returns, and associated risks.
For example, if you desire high liquidity, SGBs will not be preferred as they come with an 8-year lock-in period. However, digital gold can be bought and sold at the holder’s discretion incurring a tax on STCG if the possessions are kept for less than three years.
FAQs About Ways to Invest in Gold
So far, if we analyse the market performance of gold assets in the last six months, it has undoubtedly behaved as a hedging element to a retail investor’s portfolio. Irrespective of high inflation rates, the price of digital gold has also soared, making it a great investment alternative in 2023.
A parent can accumulate gold holdings under the mutual fund folio of their child. To accomplish this, the parent must visit the nearest branch of the preferred AMC, submit the necessary documents and complete the KYC process of the intended account holder. After successful registration, all SIP investments will be credited to the individual’s account until they reach 18 years of age when AMC nullifies the account and requests to withdraw the accrued funds.
Physical gold possessions are subjected to theft if you store them at the house. Moreover, they incur additional making charges when you intend to make jewellery out of it. Also, buying gold from local jewellers can lead to purity issues; thus, you may have to compromise on its price if you need to sell them in future at times of emergency.
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