Traditionally, gold has been the main investment of Indians. But in today’s world there are several other investment options, including fixed deposits, mutual funds, equity, property and of course gold. Investors usually buy gold in physical form such as jewellery or small bars. But now you can also invest in gold through digital means. There are a lot of ways to invest in digital gold. So let us understand about them.
You can invest in digital gold through exchange-traded or Gold ETFs, sovereign gold bonds and gold mutual funds or even through fintech companies.
Let us understand about digital gold. Nowadays, various banks, fintech platforms and jewellery companies provide facilities for digital investment in gold. Here, investors can buy digital gold. This prevents the need to physically store the gold. The seller keeps the physical gold equal to the amount of digital gold that the investor has bought. Companies like MMTC-PAMP, SafeGold, Augmont Gold invest in digital gold. Any person can go to their website and buy digital gold. Various jewellery companies are also providing the service of digital gold. For the coin, bar or jewellery that you have invested in digitally, you can get physical gold whenever you want, or you can also sell it according to the current gold rate. The biggest quality of digital gold is that you can invest just Re 1 in it. However, investors have to keep in mind that this investment doesn’t come under the purview of any market regulator.
Sovereign gold bonds It is a government scheme. These bonds are issued by the Reserve Bank of India. Its maturity is after eight years. However, you can sell it after 5 years.
You can buy a sovereign gold bond at the time it is launched. However, you can also buy it afterward on the stock exchange. The sovereign gold bond offers an annual 2.5% return, payable every six months.
In this, you can invest for a minimum of 1 gm and a maximum of 4kg of gold. When you sell the bond, you will get money according to the rate at that time. That is, you get the benefit of the increase in the rate of gold, and the 2.5% interest. There is no tax on the profit earned through sovereign gold bonds.
What are digital gold ETFs Investment in gold ETFs is just like an investment in share market. You can invest in them through exchanges. In this you invest in gold in a dematerialised way. You can invest in gold ETFs by using your demat account.
When you invest in gold ETF, you don’t get physical gold and on selling the units you get cash. If you stay invested in gold ETFs for more than 36 months, then you have to pay long term capital gains tax on its return. Another big advantage of gold ETFs is that it is highly liquid, which means it can be easily bought and sold. On an average, gold ETFs have given 7%, 9% and 12% return in 1 year, 3 years or 5 years, respectively.
Another way of investing in gold is through gold mutual funds. These mutual funds invest in various gold instruments but mainly they invest in gold ETFs. That’s why these mutual funds are also called gold savings funds. In gold savings fund, 90 to 100% of corpus is invested in gold ETFs. While some of its part is invested in money market instruments or short term debt products. But unlike gold ETFs, investors don’t need demat accout to invest in gold mutual funds. They can also be bought and sold on stock exchanges just like shares
Which is better Is it better to invest in digital money received from fintech, banks, jewelry companies or should you invest in products like gold ETFs, gold mutual funds etc.
You should keep in mind there might be some differences in the price of gold on all these platforms. This happens due to different brokerage and storage charges. In fact, expense ratios may also vary. You should always consider your goal and risk appetite before making any investment. You can consult your financial advisor regarding this.
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