In general, there are multiple way to do the investment and doing this in Gold is also a good option. Typically, individuals who is interested in direct investment in gold can do this in 5 ways:
Table of Contents
- Go with “Physical gold” in the form of gold coins, bars or jewelry.
- Digital gold bought online and stored in insured vaults by sellers for their customers.
- Gold mutual funds are commodity mutual funds that invest in gold directly or indirectly through gold ETFs.
- Gold ETFs are listed mutual funds that invest in gold bullion and units and are kept in the Demet account of the customer.
- Gold Bonds are issued by the govt, and you will earn good interest every year along with capital appreciation.
Physical Gold
Physical gold can include “Gold Jewlery”, “Bars” or Gold Coins. Let’s check out which is better option.
Gold Jewelry:
Gold jewelry has traditionally been considered a safe way to invest in gold. Due to the lack of awareness citizens of rural areas and small towns prefer to buy gold jewelry.
The price of purchasing jewelry comprises of the price of gold and a production cost that varies from 5% to 20% in addition to the gold price. This manufacturing expense of the jewelry is an expense that you might not recover when you trade & sell your gold jewelry. Bank Locker rental and jewelry maintenance cost will be extra.
Taxes: You have to pay 3% GST at current rates of jewelry, when purchasing it. You won’t be able to get it back when you will resell your jewelry.
PROS: If required, you can get a gold loan for up to 75% to 90% of the gold value at interest rates of as low as 8% per annum. This can be a good option instead of taking personal loans on higher interest rates.
Gold Coins & Bars:
If you are interested in buying GOLD but od not want to pay making charges of that gold, then you can go with you can consider gold coins or bullion bars with fine gold content of 22 carat or 24 carat.
Gold coins and bullion in 22 carats and 24 carats can be purchased from Banks & Jewelers. Various designs of gold coins are obtainable in denominations from 1 gram to 50 grams. If you require a larger denomination, then purchasable are in increments of 100 grams and 1 kilogram.
Taxes: The taxes on your coins and bars are similar to that of gold jewelry. You need to pay 3% GST, at current rates, while purchasing gold coins and bars. This amount is not recoverable when selling your coins or bars.
PROS: If required, you can get a gold loan for up to 75% to 90% of the gold coins value at interest rates of as low as 8% per annum. This can be a good option instead of taking personal loans on higher interest rates.
Digital gold bought online:
Along with Physical gold you can also buy it online. There are various apps in denominations starting from 1 gram onwards.
Gold Mutual Funds
These are mutual funds managed by various asset management companies (AMCs) that follow a fund of fund structure and primarily invest in Gold ETFs. You can invest in most Gold Mutual Funds through the ETMONEY App
Gold ETFs
Gold Exchange Traded Funds (EFTs) are traded on stock exchanges just like shares and primarily feature Physical Gold and stocks of gold mining/refining as the primary underlying assets. A Demet account is mandatory for investing in Gold ETFs.
Gold Bonds
These bonds are also known, and Sovereign gold bonds & are periodically released by RBI (Reserve Bank of India) and available for purchase through leading public / private sector banks. While returns are pegged to price of gold and guaranteed by GOI, they actually do not have physical gold as an underlying asset.
Verdict
Gold investment can be beneficial as well as can have drawbacks. It is not like stocks and bonds with regular income via dividends and interest but can work very well in providing liquidity and also as a hedge against inflation.