The festival of lights is around the corner and preparations are in full swing across India. This is the time when families shop to their heart’s content, meet their loved ones, and indulge in festivities. While buying clothes, electronics and vehicles is common this season, people also like to buy and gift gold, especially on Dhanteras, when buying gold is considered auspicious.
Physical gold can be used as jewellery, gifts, and artefacts. However, if you’re looking to invest in gold, you don’t actually have to step into a gold shop. You can do it online by investing in demat gold – gold exchange traded funds.
What are Gold ETFs?
They are open-ended mutual fund schemes that invest the money collected from you in gold. An ETF can be traded on the stock exchange similar to shares of any company. Bear in mind that you don’t own the gold physically. However, gold ETFs have some advantages over physical gold. What should you consider while investing in physical gold or gold ETFs? Let’s take a look.
Storage and Safety
Physical gold poses the obvious problem of safe storage. If you have bought a large bulk of gold, you may choose to store it in a bank locker, which entails charges. Even if you store gold at home, there is the fear of theft. On the other hand, gold ETFs has no storage cost since it is in dematerialised form. It is stored in your demat account so that you don’t need to worry about safe storage.
The money collected from investors through gold ETFs is invested in standard gold bullion of 99.5 per cent purity. Hence, you can rest assured that you have invested in pure gold. However, you must ascertain the purity of physical gold at every stage of your buying and selling process.
One reason why families invest in physical gold is that it can be easily pledged with the banks for loans. Here physical gold scores a point over gold ETFs as these schemes do not enjoy such facility. No loans are offered against ETFs.
Invest As Low As 1 Gram
It will not be feasible to buy a single gram of gold and store it safely. However, gold ETFs give you the flexibility to invest in as small a quantity as one gram. Furthermore, you can keep buying additional grams as and when you have the liquidity, if you are keen on gold investment.
Hence, this Dhanteras, you can diversify and invest in a safer, smarter way through gold ETFs due to its numerous benefits. If you find yourself pressed by tradition, you can always buy a small quantity of physical gold to meet your cultural needs while you satisfy your investment needs through gold ETFs and enhance your investment portfolio.
(The writer is CEO, BankBazaar.com)