Gold has been a sign of good fortune for a very long time. People have been putting their money into gold as a way to make their investments safer for a long time. Even nowadays, gold is seen as a clever choice to protect your money when the markets are up and down.
Whether you’re just starting to invest or already have a bunch of different investments, it’s a good idea to have investments in gold. In this article, we will explain how to invest in gold, especially for people who are just starting to invest in gold. We will also explain what the best investment plan is and the different ways you can do it, the taxes you might need to pay, and important things to think about when investing in gold.
How to Invest in Gold
Currently, there are two routes for acquiring gold: through paper and physical means. Each of these avenues offers several methods for purchasing the precious metal. Here are the six ways to buy and invest in gold.
- Gold Jewellery and Coins
- Gold Exchange-Traded Funds (ETFs)
- Sovereign Gold Bonds (SGBs)
- Gold Mutual Funds
- Gold Saving Schemes
- Digital Gold
Physical Gold
- Gold Jewellery and Coins:
Purchasing gold jewellery is a traditional way of investing in gold. However, it’s important to consider making charges and the purity of the gold. Buying physical gold as coins and bars from authorized dealers or banks is another option. Ensure that the gold is hallmarked for purity.
- Gold Mutual Funds:
Mutual funds that invest in various forms of gold, including physical gold and gold
- Gold Saving Schemes:
Some jewellers and banks offer gold-saving schemes where investors can contribute a fixed amount monthly. At the end of the scheme period, the accumulated amount can be used to buy gold at the prevailing market rate.
Paper Gold
- Sovereign Gold Bonds (SGBs):
Issued by the Reserve Bank of India (RBI), SGBs are government securities denominated in grams of gold. They offer an alternative to owning physical gold, and they also provide an interest rate in addition to the potential for capital appreciation.
- Gold Exchange-Traded Funds (ETFs):
Gold ETFs are investment funds that are traded on stock exchanges. These funds are backed by physical gold, and investors buy and sell units of these funds on the stock market.
- Digital Gold:
Several platforms offer the option to buy digital gold, allowing investors to purchase gold in small quantities online. The purchased gold is stored in a secure vault, and investors can either take physical delivery or sell it back to the platform.
Best Way to Invest in Gold
The best way to invest in gold in India depends on your financial goals and preferences. Each gold investment plan has its pros and cons. To find the best way to invest in gold consider the following table:-
| Investment Type |
Description |
Pros |
Cons |
| Sovereign Gold Bonds (SGBs) |
Issued by the Reserve Bank of India (RBI), SGBs offer a secure and government-backed way to invest in gold. They come with a fixed interest rate, and the investment is in the form of grams of gold. SGBs also provide the option to receive the maturity amount in cash or physical gold. |
- Interest income in addition to potential capital appreciation.
- No storage hassles as it’s in dematerialized form.
- Capital gains tax exemption on redemption after the lock-in period.
|
- Fixed tenure and maturity date.
- Liquidity may be a concern if sold before maturity.
- Interest income is taxable.
|
| Gold Exchange-Traded Funds (ETFs) |
Gold ETFs are listed on stock exchanges and offer a convenient way to invest in gold without holding physical gold. These funds track the price of gold and are traded on the stock market like equities. They provide liquidity and can be bought and sold during market hours. |
- Easy liquidity through stock exchanges.
- No storage concerns
|
- Involves brokerage charges.
- Value is linked to market fluctuations.
- No physical possession of gold
|
| Gold Mutual Funds |
Investing in gold mutual funds allows you to access a diversified portfolio of gold-related assets managed by professional fund managers. This option is suitable for those who prefer not to manage the logistics of physical gold. |
- Professional fund management.
- Diversification across various gold assets.
- Easy to buy and sell like regular mutual funds.
|
- Management fees and expenses.
- NAV is subject to market fluctuations.
- No physical possession of gold.
|
| Digital Gold |
Several platforms offer the option to buy digital gold, allowing investors to purchase gold in smaller denominations online. The purchased gold is stored in a secure vault, and investors can either take physical delivery or sell it back to the platform. |
- Easy online access to buy and sell.
- Fractional ownership for small investments.
- Secure storage with the option for physical delivery.
|
- Service charges.
- Reliance on the platform’s security measures.
- Market prices are subject to fluctuations.
|
| Physical Gold |
Buying physical gold in the form of coins, bars, or jewellery is a traditional method. Ensure that the gold is hallmarked, and purchased from reputable sources. This option is suitable for those who prefer possessing tangible assets. |
- Tangible asset ownership.
- Cultural and traditional significance.
- Can be used for personal adornment.
|
- Making charges and potential loss in resale value.
- Storage and security concerns.
- Limited divisibility for smaller investments.
|
| Gold Saving Schemes |
Some banks and jewellers offer gold-saving schemes where investors contribute a fixed amount regularly. At the end of the tenure, the accumulated amount can be used to purchase gold at the prevailing market rate. |
- Systematic investment with fixed monthly contributions.
- Some schemes offer incentives or discounts.
- Potential to convert savings into gold at the end of the tenure.
|
- Making charges may apply.
- Limited flexibility to change the investment amount.
- Dependence on the credibility of the scheme provider.
|
Is It Better to Invest in Gold or Other Investment Plans
Whether it’s better to invest in gold or other investment plans depends on various factors, including your financial goals, risk tolerance, investment horizon, and the overall market conditions. Each type of investment has its own set of advantages and disadvantages.
For example, Guaranteed return investment plans offered by life insurance companies provide a sense of stability and predictability, providing investors with fixed returns and, in some cases, regular income. This can be particularly attractive for those seeking a low-risk investment option, aiming for short-term financial goals, or desiring a steady cash flow. However, it’s essential to acknowledge that guaranteed return plans may come with lower potential returns compared to riskier assets, and their performance might not always keep pace with inflation.
On the other hand, choosing to invest in gold introduces a different set of considerations. Gold, historically regarded as a hedge against economic uncertainties and inflation, can offer portfolio diversification. While gold investments lack guaranteed returns and may experience short-term price volatility, they serve as a potential long-term store of value. Investors looking for wealth preservation, a hedge against market fluctuations, and a form of tangible asset ownership might find gold to be a valuable component in their investment strategy. Ultimately, the optimal choice depends on an individual’s financial objectives and the level of risk they are comfortable with in their investment portfolio.
Conclusion
Investing in gold in India offers diverse avenues catering to various investor preferences and financial goals. Whether opting for physical gold, Gold ETFs, Sovereign Gold Bonds, Gold Mutual Funds, or digital gold platforms, individuals can tailor their gold investment plan based on factors such as liquidity needs, risk tolerance, and desire for long-term wealth preservation. Investors must conduct thorough research, stay informed about market conditions, and align their gold investment strategy with their unique financial objectives. Ultimately, the choice of a gold investment plan should reflect a well-informed decision that aligns with one’s overall investment portfolio and objectives in the dynamic economic landscape of India.