Best Ways to Invest in Gold in India 2023
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.Read more
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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.
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.
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.
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.
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.
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:
|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.
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