quality as well as ensure its safety on an ongoing basis — be it at home or a bank locker.
Another option is gold ETFs that have gained popularity recently. With ETFs, unlike physical gold, one does not hold the gold but stores it in an electronic form — making more secure. Typically, one unit of any gold ETF is equal to one gram of gold. You invest in the ETF and, in turn, the asset management firm buys an equivalent amount of gold and holds it.
Gold funds are another investment avenue. These are mutual funds that invest in companies engaged in gold mining or processing. These are indirect beneficiaries of rise in gold prices. One can invest in gold funds via the SIP route, or like any other mutual fund.
Recently, a lot of jewellers have come up with gold savings schemes. Under these schemes, an investor saves a certain fixed sum each month (this is held by the jewellery company) and the jeweller uses this to purchase gold at ‘the lowest price each month’. They even offer schemes where if one invests for 12 months, he gets an extra month’s investment worth of gold free.
Each option has its pros and cons, with differing price structures and convenience for each. For example, gold ETFs are cheaper options with only brokerage charges of around 0.5% to pay compared to 10-15%-making charges for physical gold. Another advantage of buying gold in electronic form is that the price is linked to international prices and is very transparent, which is not the case with physical gold — where every jeweller has a different price. It is important to keep in mind that investments in gold are taxable at the time of redemption/ sale of the gold.
In case of physical and e-gold, long-term capital gains are calculated after three years.In case of gold ETFs, it is one year (similar to a gold mutual fund). However, one can use indexation to reduce the tax burden. Instead of just looking at gold, one can also consider other precious metals /gems (silver, platinum, diamonds, etc)