Best Ways to Invest in Gold in India 2024

Gold is believed by the experts and layman equally to be the most robust model of investment. Undoubtedly, it is the favorite investment avenue in our country. And for the right reasons, the performance of gold has far surpassed the performance of the equity market or real estate as seen for the last 10 years. Gold is just the right asset to let your savings keep a step ahead of inflation. Though in early 2021, the market has witnessed a stumble in the prices of gold, the experts believe this phase is only transitory and will pass soon.

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Coming to the million-dollar question, what are the best ways to invest in gold, and which one of them is the best? For ages, the conventional and the only best way to invest in gold was to buy physical gold, in the form of coins, bullions, or jewelry. But with time, more evolved forms of investment emerged like Gold ETFs (exchange-traded funds) and Gold Mutual Funds. Gold ETFs are like buying proportionate ownership in gold without having to carry or store the actual physical gold. It is becoming the new favorite among investors as it frees them from bearing the risk of theft or burglary. Gold Mutual Funds involve investing, not in gold, but companies engaged in gold mining. In the year 2021, these three seem to be the best ways of investing in gold. They come with their own set of pros and cons. Let's look at some of the contrasting features between Gold, Gold ETFs, and Gold Mutual Funds. 

Investment in Gold Vs Gold ETFs Vs Gold Mutual Funds 

Gold Gold ETFs (Gold Exchange Traded Funds) Online Gold Mutual Funds
It is simply making a direct investment in physical gold It is somewhat similar to making a direct investment in gold, but here the investor buys proportionate ownership in the collective vault instead of buying the physical gold The investment is made not in gold but in the companies involved in mining the gold
There's no need for a Demat account to invest in Gold The investor needs to have a Demat account There's no need for a Demat account to invest
Change in the price of gold directly affect the prices of Gold ETFs Change in the price of gold directly affect the prices of Gold ETFs Change in the price of gold does not affect Gold MFs directly
There's no investment charge involved but if the gold is bought as jewelry or bullion,  the buyer has to bear the making charges. The investment in Gold involves the asset management and brokerage charges, so the returns are lesser than the actual increased value of the gold There's a charge involved in the management of the funds. Plus, there are entry and exit charges that make the overall returns smaller than the actual increased value of gold
The buyer has to bear the risk of theft/burglary associated with carrying around or storing the physical gold ETFs ease out the whole affair of trading gold as the buyer doesn't need to carry or store any physical gold There's no risk of theft/burglary involved in Gold MFs as the buyer doesn't need to carry or store any physical gold
No paperwork involved in trading gold Paperwork is involved in trading Gold ETFs Paperwork is involved in trading  Gold MFs
Not affected by the stock market fluctuations. On the contrary, gold is the only commodity that keeps the hope of investors up in the bearish times Not affected by the stock market fluctuations Affected by the stock market fluctuations. When the stock market runs bearish, the gold stocks take the fall too
No Systematic Investment Plan (SIP) option No SIP option Gold MFs gives the investor an option to invest through a Systematic Investment Plan that makes the investment more disciplined and  more affordable
Best suited to the investors with conventional tastes in investments Best suited for those investors who have a taste for trading intraday. It's a big no for sluggish investors. Best suited to the investors who have a risk appetite and a knack for the stock market

Other Modes of Investment

Even though the above-mentioned ways of investment in gold have emerged tremendously over the past few years, there are some other ways of investment as well that an investor can opt for, if planning to invest in gold.

  1. Investment in Solid Gold

    Investment can be made with a cliché process of putting money in solid gold items like gold coins, biscuits, or bars. This purest form of purchase involves minimal risk of the forgery but a high risk of theft and storage.

  2. Gold Schemes

    Generally, jewelers come out with a lot of gold schemes from time to time for their valued customers. An investor has to invest a certain amount in the gold scheme, just like a SIP, for a certain period of time. After maturity, an investor has a lump sum amount in hand for which they can purchase the gold.

  3. Digital Gold

    In a recent development, digital gold has gained a lot of popularity in the financial marketplace. Fintech platforms provide the option of buying and selling gold just like any other digital transaction. Investors should keep in mind that digital gold is not offered on all platforms and one should analyze the market carefully before investing to avoid forgery.

  4. Sovereign Gold Bonds

    Supervised by the Reserve Bank of India, Sovereign Gold Bonds were introduced by the Government of India in the year 2015. The objective behind launching it is to offer an alternative option for investment in solid gold. Usually comes with a 5-year lock-in period, Sovereign Gold Bonds can be redeemed in cash later.

People Also Read: SIP Calculator

What to Invest in Gold?

Here is a pointwise list of why an investor should opt for investing in gold rather than any other investment option:

Parameters Details
Safety It is very safe to invest in gold as it is one of the oldest forms of investment that has the power to beat inflation
Liquidity There is no issue in liquidity when it comes to investing in gold. It can be redeemed in cash anytime an investor wishes to
Returns Look at the history of golds' inflation-beating rate. Whatever the situation of the market is, gold has always seen a rise over the passing years
Inversely related to Equity Whenever the equity market falls, the rate of gold rises. Gold investment improves the overall portfolio of the investor

In the End!

Each type of investment comes with its flaws and powers. Investment in gold should be made carefully just like any other investment option keeping all the limitations in mind.

Investments should be based on market research and not by any other influence.

Past 5 Year annualised returns as on 01-06-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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