We Indians are obsessed with gold. According to one estimate, India is home to the largest hoard of privately held gold, worth about 1.5 trillion USD (~110 lakh crore rupees!). Gold is not just seen as a status symbol but also as a way to maximise wealth. The price of the yellow metal has always gone up over the long term and it makes sense as a long term investment instrument.
There are different ways of investing in gold and each has its own advantages and disadvantages. But majorly gold investments can be classified into two categories.
This involves the traditional way of buying gold as coins or jewellery. Gold in this form can easily be bought or sold in any jewellery shop and can be used as a collateral on loans. But the major problem with investing in physical gold is that you will have to worry about its storage and security. Also there can be problems in its purity, which can vary from seller to seller. If the gold is bought in the form of jewellery, you will also have to contend with high making charges (which are often irrecoverable)
This involves investing in gold via Sovereign Gold Bonds (SGBs), gold ETFs (Exchange Traded Funds), gold mutual funds or directly via various digital gold platforms. The major advantage of the digital form of gold is that you don’t need to worry about its safety or purity. Plus owning digital gold is highly cost effective as there is no entry cost in SGBs and minimal cost (usually ~1%) for gold ETFs and gold mutual funds. SGBs also earn around 2.5% interest per annum. SGBs are tax exempt on redemption, but gains in gold ETFs and gold mutual funds after 3 years are subject to 20% tax post indexation.
While this post is not an investment recommendation, you too can easily own gold by investing in gold mutual funds or gold ETFs. You can head over to Niyo Money app and choose the gold mutual fund of your choice. Or you can go to our Stocks & ETFs section and invest in gold ETFs.
With that being said, tell me:
- Gold mutual funds
- Sovereign Gold Bonds (SGBs)
- Gold ETFs
- Via digital gold platforms
- I buy only physical gold (coins/jewellery)
- I don’t invest in gold at all