Looking to invest in gold this festive season? Here are some of the top investment options | The Financial Express

Looking to invest in gold this festive season? Here are some of the top investment options

Buying physical gold involves considerable making charges and also has quality concerns and expenses – like hiring lockers, buying insurance, etc – to keep the gold secure.

Looking to invest in gold this festive season? Here are some of the top investment options
Buying gold during the festive season is an age-old tradition in India.

Buying gold during the festive season is an age-old tradition in India. However, most people prefer to invest in physical gold in the forms of gold jewellery, gold coins etc during the festivities.

As buying physical gold – especially gold jewelleries – involves considerable making charges and also has quality concerns and expenses – like hiring lockers, buying insurance, etc – to keep the gold secure, now-a-days investors are gradually shifting towards paper or digital gold.

Apart from convenience and security, some of the digital gold options also have tax advantages that further benefit the investors as well.

CA Ruchika Bhagat, MD, Neeraj Bhagat & Co shares her views on some of the digital gold options that you may consider while investing during this festive season:

“Being considered auspicious, the demand for gold strengthens during festivals such as Dussehra, Dhanteras, and Diwali. Traditionally, people only bought gold jewelry and coins, of late smart investors also started purchasing gold in paper forms such as – Gold exchange-traded funds (Gold ETFs), Sovereign gold bonds (SGBs) issued by the Reserve Bank of India, and Gold Mutual Funds (Gold Mfs),” said Bhagat.

“One of the best investment options that people sought after is an investment in Gold. These investments generate good returns, and many other benefits accrue to the investor when we consider the Income Tax,” she added.

Bhagat explains the benefits of digi gold over the traditional one:

Liquidity

Can be bought or sold with the click of your mobile phone, without the need to even visit your local Jewelry Shop. With the instant money transfer into your account, it ensures to provide the utmost liquidity.

Small Savings? No Worries…

One might be thinking that investment in gold requires a hefty sum of savings from your income. If it is so, this is for you. You can start by investing in Digital gold as low as Re 1.

There is no compulsion to buy 1 gm of gold, whose value is also a bit high. Digital gold offers the opportunity with limited savings to invest in Gold.

Purity

‍While purchasing digital gold, you can be assured of its purity. There is no chance of fraud happening with you regarding the purity of gold, which is 24 carats. Your total amount of investment goes in Gold only.

Savings on the cost

When buying gold jewelry, you not only have to pay the price of gold but also make charges and additional taxes.

‍Jewelers charge anywhere from 7 per cent to 25 per cent based on the design of your jewelry. If the chosen piece of jewelry includes precious stones and gems, the cost increases, and its value is also included in the gold price.

‍When you deal with gold jewelry, you never need to collect or restore the value of that inlaid jewelry.

Security

One thing which needs to be noted is that every gram of gold you invest in Digital Gold is backed by the physical gold, which is held by these companies. Hence, security concerns get eliminated.

No storage concerns‍

Are you afraid of losing your physical gold, whether by theft or any other reason? You may visit the back to get a locker and pay annual charges for such a locker. Or you can invest in such Digital Gold, and the rest gets assured in itself. All the Digital gold is insured and is protected under high vaulted chambers.

Bhagat explains some of the options to invest in Digital Gold:

Sovereign Gold Bonds (SGBs)

They are substitutes for holding physical gold. Investors need to pay the price in cash and get the total amount on maturity. It is considered a safe way to invest in gold, especially for those with a long investment purpose say 5 years. The Reserve Bank of India (RBI) issues SGBs multiple times a year and fixes a price for each issuance. Investors can approach the secondary market to sell these bonds.

These bonds offer the investors an assured interest rate of 2.50 per cent (fixed rate) per annum on the initial investment amount. The investor gets the credit of interest on a semi-annual basis.

On the other hand, SGBs have a lock-in period of 8 years and one can use the exit option only from the fifth, sixth, and seventh years on the interest payment dates. Alternatively, if investors need to exit before 5 years, they will have to sell the SGB on the stock exchanges. Capital gains are exempt from such bonds.

Gold ETFs

Gold ETFs allow individuals to invest in gold in a dematerialized format, which can be bought and sold on the stock exchange just like shares. In your Demat ledger, you get the Gold equivalent to the physical quantity of Gold in electronic form.

All these are listed on the stock exchange, where you can get real-time updates about their prices. ETFs don’t have any exit loads, which means investors can buy or sell the units at any time during market hours.

Gold mutual funds

Gold mutual funds are primarily open-ended funds that allow citizens to invest without a Demat account. The gold fund units are determined by way of Net Asset Value, which is disclosed at the end of the trading hours. In this scheme, professional experts manage your investment to create wealth and reduce risks.

These units of gold can be redeemed by selling them back to the house based on NAV for the day.

Gold Fund of Funds (FOFs)

These are funds that invest in a basket of mutual funds. They pass on the expense ratio of individual funds along with their charges and that makes it slightly expensive.

“Buying gold is just one click away so nowadays it’s not difficult to buy the gold you can check digitally and buy the gold very easily,” said Bhagat.

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