Gold, the yellow metal has from time immemorial been one of the most sought-after precious commodities. But owing gold or investing in gold need not necessarily be limited to owning it by way of jewellry. There are different ways of investing in gold. Gold is used as a way to diversify risk by investors. It brings in the element of stability to a portfolio when other asset classes have taken a hit. Thus, it plays a key role in asset allocation.
So, if you are wondering what are the different ways to invest in gold, read on:
Gold is often bought as jewelry but this may not be the greatest way to invest because of the costs involved in making them and the value attached to jewellry. It becomes less of an investment and has a greater sentimental value to it. However, physical gold also involves owning it by way of coins or bars. There are gold coi schemes by several banks, NBFCs and jewellers. These coins are typically available in denominations of five and ten grams, while the gold bars are of 20 grams. These are hallmarked and are tamper proof.
Gold exchange traded funds (ETFs):
Gold ETFs are akin to buying a certain quantity of gold without actually going to the trouble of physically owning it. There is no risk of owning the physical gold, as it is stored in a paper form. You would need a demat account to trade in gold ETFs. Buying or selling of gold ETFs happens on the stock exchange. If you wish to invest in gold ETFs, you can buy them through your broker with the help of a demat and trading account. You can start with as low as a single unit which is one gram of gold. You can use gold ETFs as collateral if you wish to borrow a loan.
Sovereign gold bonds:
These bonds are issued by India’s central bank, the Reserve Bank of India. They are available in multiples of 1 gm, and an investor can buy up to 4 kg. The bonds are essentially government securities and used as replacement to owning physical gold. The bonds have an eight-year tenure and you can exit in the last three years before the eighth year. Sovereign gold bonds also fetch you a 2.5 per cent interest on the initial investment. These bonds are listed on the stock exchanges and an investor can sell or buy the bonds on the exchange, once the subscription period is over.
There is one more investment option, ie, digital gold. This is issued by Metals and Minerals Trading Corporation of India (MMTC) in association with Switzerland’s PAMP, a bullion brand. You can buy gold effortlessly on your smartphone via digital wallet platforms. The gold you buy is safeguarded in a storage that is under the custody of MMTC-PAMP. You can keep the gold secure for five years, and take delivery anytime within that period. The gold can be bought as coins of many denominations or bars. The pricing is transparent and is linked to global market rates.
Physical gold vs other forms of investing :
To sum up, there are many options to invest in gold, including as a physical asset. However, owning physical gold comes at a cost, both in terms of security and in the cost of making them. Sovereign gold bonds come with a set of advantages. They are safe and don’t involve any costs pertaining to storage or making. This investment option is safe because it is issued by the RBI on the government’s behalf. When the bond is withdrawn, upon maturity or before, the investors receive payment at market value of gold at that time. Also, there is no tax on capital gains.
Similarly, owning the precious metal in the form of gold exchange traded funds or ETFs would mean you actually invest in a price that is closer to the actual price of gold. Also, when you invest in gold ETFs, there is no need to worry about adulteration. You can keep track of your investment in real time, and gold exchange traded funds are highly liquid assets to boot. You can enter and exit gold ETFs whenever you wish to. It is among the easiest options if you wish to invest in gold.
If you wish to invest in gold ETFs, all you need to do is open a demat and trading account with a broker. You will be asked to fill in your basic details before you get yourself registered. A demat and trading account with Angel One offers a seamless experience and you can also receive investment tips and health scores that show you how your portfolio is faring. It also offers a smart phone app to make the trading experience fast, smooth and efficient.