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Diwali 2020: Here are different ways to invest in gold this Dhanteras


Gold buying is considered auspicious during Dhanteras - the first day of the Diwali festival.

Diwali 2020: Here are different ways to invest in gold this Dhanteras
Gold buying is considered auspicious during Dhanteras - the first day of the Diwali festival. With the benefits of liquidity, value appreciation, and acting as a hedge against inflation and currency valuation, investing in gold is essential for a well-diversified portfolio. Additionally, investors believe that gold brings financial security to their portfolio.
Investments in gold can be made either in physical or a paper/electronic format.
While physical gold involves investing in bullion gold, like bars, coins, or jewelry, the value of which is determined by the actual gold content, digital gold is an easy and convenient way of investing without concerns of purity, making charges, and storage.
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Here are the details related to different types of gold investing, which investors can consider this Dhanteras:
Physical gold
Physical gold 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.
According to Gopal Kavalireddi, head of research, FYERS, it is one of the most sought out options for purchases during auspicious occasions.
“However, with the introduction of more convenient options, investors have restricted physical gold purchases to a minimum,” he opines.
Digital gold
This is another form of investing in gold with other options as gold Exchange Traded Funds (ETFs), gold mutual funds, and sovereign gold bonds (SGBs).
Gold ETFs
In Gold ETFs, as Kavalireddi explains, gold equivalent to physical quantity is deposited in an electronic form, in the purchaser’s demat account.
“These gold ETFs are traded on stock exchanges, similar to shares of any listed entity, making it convenient for an investor with a demat account. Liquidity without any lock-in period or exit loads are additional advantages. Gold ETFs qualify for long-term capital gains if held for a year or more,” he explains.
Gold ETFs are accepted as collateral for loans in financial institutions.
"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 ETFs are fast gaining popularity, with investors putting in close to Rs.6350 crore in CY2020," Kavalireddi elaborates.
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.
"Gold mutual funds are ideal for passive investors looking to build wealth through a systematic savings mechanism with smaller savings. However, these mutual funds attract exit loads if units are redeemed within the predefined lock-in period," Kavalireddi says.
Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds (SGBs) are issued in tranches by RBI on behalf of the government of India. These bonds are ideal for investors with a long-term horizon, as the maturity period of the bonds is 8 years.
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.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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