Introduction
Gold has been a valuable and highly sought-after precious metal for coinage, jewelry, and other arts since long before the beginning of recorded history. Today, it continues to hold sway as a viable investment option. Here’s a comprehensive guide on the various ways you can invest in gold.
Ways to Invest in Gold
1-Physical Form
Investing in gold in its physical form is the most traditional method. This can be in the form of jewelry, coins, or bars. However, this method comes with its own set of challenges such as the risk of theft, issues with purity, and loss during manufacturing.
2-Digital Form
Digital gold has emerged as a popular investment option in recent years. There are several platforms like Digigold, Groww, Zerodha, Tanishq, 5 paisa, Gpay, Paytm, etc., where you can invest in digital gold. The benefits include no making charges and no fear of theft.
3-Gold ETFs
Gold Exchange Traded Funds (ETFs) can be purchased on exchanges like NSE or BSE. Examples include IDBI Gold ETF, SBI Gold ETF, Nippon India Gold ETF, etc. They also come with no making charges and no fear of theft.
4-Gold Mutual Funds
You can invest in Gold Mutual Funds in the same way you invest in other Mutual funds. Examples include SBI Gold Fund, Axis Gold Fund, etc. These too have no making charges and no fear of theft.
5-Sovereign Gold Bonds
Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India (RBI). You can invest in SGBs by visiting any bank like SBI, HDFC Bank, etc. They come with no making charges, no fear of theft, and no GST.
Quick Comparison
Here’s a quick comparison of the different ways to invest in gold:
|
Basis |
Physical |
Digital |
Gold ETF |
Gold Mutual Fund |
Sovereign Gold Bond |
|
Total Charges |
10%-20% (Making, GST, insurance) |
Up to 6% (GST+ Spread) |
0.5%-1% Expense Ratio |
0.6% to 1.2% expense ratio |
No visible Expense |
|
Lock in period |
- |
- |
- |
- |
5 Years |
|
Maturity |
- |
- |
- |
- |
8 Years+3 Extendable |
|
Risks |
Theft, Purity Issue, loss during manufacturing |
Lack of regulatory oversight |
Market risk related to the volatility of gold prices |
Market risk related to the volatility of gold prices |
Risk of capital loss if price of Gold declines on maturity |
|
Benefits |
Its value is not affected by rules and regulations by government. |
No making charge, No fear of theft. |
No making charge, No fear of theft. |
No making charge, No fear of theft. |
No making charge, No fear of theft, no GST. |
Tax Comparison
Here’s a comparison of the tax implications for the different ways to invest in gold:
|
Basis |
Holding period |
Physical Gold |
Digital Gold |
Gold Fund |
SGB |
|
STCG |
Less than 3 years |
As per tax slabs |
As per tax slabs |
As per tax slabs |
Can’t Sell before 5 years |
|
LTCG |
More than 3 years |
20% post indexation |
20% post indexation |
20% + 4% cess |
Can’t Sell before 5 years |
Returns Comparison
Here’s a comparison of the returns for the different ways to invest in gold:
|
Basis |
Physical |
Digital |
Gold Fund |
SGB |
|
Investment Amount |
10,000 |
10,000 |
10,000 |
10,000 |
|
Charges |
10-20% |
3% GST |
0.5-1.2% |
No Charge |
|
Actual Investment |
8,500 |
9,700 |
9,900 |
10,000 |
|
Interest |
- |
- |
- |
2.5% per annum |
|
CAGR Last 5 years |
12.3% |
12.3% |
16% |
12.3% |
|
Tenure |
5 |
5 |
5 |
5 |
|
Corpus |
₹15,182 |
₹17,325 |
₹20,793 |
₹17,861 |
|
Interest |
- |
- |
- |
₹1250 |
|
Total |
₹15,182 |
₹17,325 |
₹20,793 |
₹19,111 |
|
Tax+ Spread |
₹ 570 |
₹1498 |
₹2590 |
- |
|
Post Tax |
₹14612 |
₹15827 |
₹18203 |
₹19,111 |
Investing in gold can be a great way to diversify your investment portfolio. However, it’s important to understand the different ways to invest in gold and their respective benefits and drawbacks. Always do your research and consider your financial goals before making an investment decision.
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