Women in India love physical gold and like to wear ornaments like ear rings, gold chains, bangles etc on a daily basis despite the problems of safety and storage associated with them.
Dhanteras is an occasion to amass wealth and people tend to buy precious metals, including gold. Apart from the traditional way to buy gold in the form of jewelleries, there are various investment avenues now available to acquire the yellow metal.
The most popular way to invest in gold in India is through the purchase of jewellery. Apart from wearing some ornaments like ear rings on a daily basis, women here love to wear gold jewellery on special occasions and family gatherings like marriage etc. Apart from jewellery, people also buy physical gold in the form of coins and bars.
Although physical gold provides opportunity of look and feel the metal, but acquiring gold in this form involves some costs, which include cost of storage, hiring lockers, buying insurance etc as it’s the buyers’ responsibility to secure the gold. Moreover, in case of jewellery, the cost, making charges and purity of gold, as well as the resale value vary from jeweller to jeweller. So, apart from locking money in physical gold, you have to bear the maintenance charges also.
Here are some other ways through which you may invest in gold.
Gold stocks: You may make direct investments in the stocks of gold mining companies. Although it doesn’t have the shortcomings of investing in physical gold, but it involves the risk of investing in direct equity due to lack of diversification.
Gold funds and ETFs: One of the funds offered by Asset Management Companies (AMC) are gold funds. Such mutual funds invest in the stocks of gold mining companies, jewellers and other firms associated in gold businesses. Apart from eliminating the shortcomings involved in investments in physical gold, such funds also ensure stability in NAV through diversification. However, investors of such funds need to bear the fund management charges, which are more in gold funds and in ETFs.
Sovereign Gold Bonds (SGB): Denominated in grams of gold, such bonds are issued by the government at the prevailing gold prices from time to time. SGBs may also be bought or sold in secondary markets at a price close to current market price of gold. Apart from carrying the risk of holding golds, the government also pays interest on SGB.
E-gold: You may also buy gold in dematerialised form through the National Spot Exchange Limited (NSEL). E-gold may be bought in small quantities and may be sold later either in the prevailing gold prices or may be converted in physical gold. Moreover, the responsibility to protect the gold is with the NSEL and not the buyer of the e-gold. So, it is a convenient and cheaper way to replace the physical gold.