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Dhanteras 2024: More investors have started to view gold not just as an item of tradition but as a strategic financial instrument.
Know all options to invest in gold beyond bars and jewellery
There are several alternatives to physical gold that investors can explore to diversify their portfolios. Traditionally, people have invested in gold for emotional, religious, or cultural reasons, often viewing it as a secure and lasting asset. However, many overlook the fact that gold is a non-income-generating asset, which can limit its financial growth potential. Nevertheless, in recent years, due to global economic slowdowns, gold has gained popularity as a hedge against volatility. This demand has positively impacted its CAGR (compounded annual growth rate), reinforcing its status as a stable store of value.
(Check Gold Rate Today In India)
The story of gold as an investment has evolved. As economies shift, more investors have started to view gold not just as an item of tradition but as a strategic financial instrument. Unlike other assets, gold’s value has shown resilience against inflation and currency depreciation, making it an attractive option during economic uncertainties. Modern investors can now choose from digital gold, gold ETFs, and sovereign gold bonds, among other options, to enjoy both the security of gold and the flexibility of diversified financial planning.
According to the information available for financial awareness on the official portal of the National Centre for Financial Education, below are some other ways of investing in gold.
NCFE is a not-for-profit company promoted by the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority of India and the Pension Fund Regulatory and Development Authority. It aims to undertake a financial education campaign to help people manage money.
Gold Jewellery, Bars, and Coins
Gold jewellery, bars, and coins remain the most popular forms of gold investment in India, combining enjoyment with value appreciation over time. For those buying bars and coins, banks offer options in tamper-proof packaging, ensuring authenticity and purity. However, jewellery comes with high making charges, making it a pricier option. Additionally, if gold items lack hallmark certification, there may be concerns about purity, and the certification itself adds to the overall cost.
Selling jewellery can also bring challenges, as buyers may question quality if it wasn’t originally purchased at their store, often leading to haggling and a lack of trust. Storing physical gold incurs additional costs, and this form of gold ownership may also attract wealth tax.
Gold ETFs (Exchange-Traded Funds)
Gold ETFs have become a popular choice among retail investors. Each ETF unit represents one gram of gold, held electronically in a demat account and traded on stock exchanges. This format offers enhanced security, easy liquidity, and freedom from storage concerns. Since gold ETFs are required to hold 99.5% purity standard gold bullion, investors benefit from assured quality. Investing requires a broking and demat account but is straightforward and flexible, allowing smaller, staggered purchases.
The appeal of gold ETFs includes zero storage costs, theft protection, and tax advantages: capital gains are tax-free after a year (as opposed to three years for physical gold). Unlike physical gold, gold ETFs are exempt from wealth tax and VAT. Currently, there are over 25 gold ETF schemes available across 14 fund houses.
Gold Fund of Funds (FoF)
Gold FoFs are funds that invest in gold ETFs, eliminating the need for a Demat account and allowing investors to opt for SIPs (Systematic Investment Plans) in gold. This option, while convenient, includes costs such as a 1-2% exit load if redeemed within a year and an additional expense ratio of approximately 1.5%.
E-gold, offered by the National Spot Exchange Ltd (NSEL), provides yet another digital route to gold ownership. E-gold units, equivalent to one gram of gold, are held in a demat account and fully backed by physical gold. Trading occurs on weekdays between 10 a.m. and 11:30 p.m. Investing in e-gold requires a separate demat account, which involves an account-opening fee. The long-term capital gains tax advantage applies after three years, unlike gold ETFs or FoFs, which offer it after one year. Like physical gold, e-gold is also subject to wealth tax.
Gold Futures
For those with a higher risk appetite, gold futures offer a way to profit from price changes in gold through a futures contract on commodity exchanges like MCX and NCDEX. This approach lets investors lock in a future gold price, potentially benefiting from price increases (or decreases if a short position is taken). While promising, futures trading carries higher risks, with the potential for significant losses if market predictions don’t play out.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.
