Gold-buying is considered auspicious on Dhanteras, the first day of the Diwali festival. It is an age-old tradition among Indian households, serving as both an indulgence and investment.
One can either choose to invest in physical gold or opt for an investment through paper/electronic form. While physical gold involves investing in bullion gold, like bars, coins, or jewellery, the value of which is determined by the actual gold content, digital gold is a way of investing without concerns of purity, making charges, and storage.
Here's a list options for gold investment that investors might want to consider this Diwali:
Physical gold is one of the most sought-after options during auspicious occasions. It doesn’t require a demat account, has minimal paperwork, and doesn’t incur additional charges except for GST, but purity, safety, and storage are key concerns.
The different forms of physical gold are jewellery, bars and coins.
Sovereign Gold Bonds (SGBs)
A safe way to invest in gold is Sovereign Gold Bonds (SGBs) especially for those with a long investment window of 5-8 years. The Reserve Bank of India (RBI) issues SGBs multiple times in a year and fixes a price for each issuance. Users can also buy or sell SGBs in the secondary market.
Redemption is possible after five years from the date of issuance. The bond will be tradable on stock exchanges if held in demat form and can also be transferred to any other eligible investor. In addition to capital appreciation, investors are paid 2.5 percent guaranteed interest on an annual basis.
Investors looking for a more liquid option can consider gold ETFs, experts say. Gold ETFs allow individuals to invest in gold in a dematerialised format, which can be bought and sold on the stock exchange just like shares.
Gold equivalent to physical quantity is deposited in an electronic form, in the purchaser’s demat account. These qualify for long-term capital gains if held for a year or more. The minimum investment in gold ETF is 1 unit (equivalent to 1 gram) and involves brokerage or commission charges of 0.5 to 1 percent.
Gold mutual funds
Gold mutual funds are open-ended funds that invest in gold ETFs or in shares of gold mining companies. Regulated by Sebi, an investor can invest as low as Rs 500 (through a systematic investment plan) or any amount greater than Rs 5,000 as lumpsum.
Units of gold funds can be redeemed by selling them back to the fund house based on the NAV for the day.
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