Summary: Gold as an investment enhances the diversity of your portfolio and promotes long-term wealth preservation. Click to learn the best way to invest in gold today!
13 Dec 2022 by Team FinFIRST
Gold never gets old in a country like India, where it has been a part of almost every household, not only as jewellery but also as an investment.
While there are variousgold saving schemes available in India besides purchasing gold coins, bullion, and jewellery, thebest option to invest in goldwould depend on preferences and factors such as the amount of investment and the need for liquidity.Digital goldis a virtual investment, whereasgold ETFsandgold mutual fundsare more suitable for people familiar with stock and mutual fund investments. On the other hand,sovereign gold bondsoffer a government-backed investment option in gold.
The options are aplenty; however, let us look at eachform of investmentin detail.
READ MORE
Digital Gold
Digital goldin India is offered by MMTC-PAMP, Augmont, and SafeGold. You can also buy it from platforms such as mobile e-wallets, broking firms, and financial institutions.Digital goldis certified pure, stored safely, and fully insured, and the market price of physical gold governs the return on this investment.
You can buydigital goldof denominations as low as one rupee, sell it back at any time, and even opt for physical delivery.
Gold ETFs
Gold ETFsare mutual funds that track the domestic price of physical gold. The fund management company uses your investment to buy gold bullion. Asgold ETFsare listed and traded in stock exchanges,investing in gold ETFsis safe and tightly governed. You can buy and sell units of gold ETF on the stock exchange on the same dayor any other day just like stocksThe minimum investment is one unit of gold ETF, which represents the price of one gram of physical gold. Since these are listed,gold ETFshave high liquidity and can be easily traded in the stock market.
Gold Mutual Funds
Gold Mutual Funds invests in the units provided by Gold ETFs. As the underlying asset is held in the form of physical gold, its value is directly dependent on the price of Gold. This functions just like any other Mutual Funds.
Sovereign Gold Bonds
Sovereign gold bondsare RBI-issued government bonds representing grams of physical gold. These are sold through banks, post offices, Stock Holding Corporation of India, and authorised stock exchanges and are offered in a limited number of tranches annually. You can also apply for them online throughIDFC FIRST Bank’s SGB investment page. The minimum investment quantity is one gram, and the maximum allowed for an individual is 4 kg. They offer an assured 2.5% interest per annum, in addition to the price appreciation in gold. SGB schemehas a tenure of 8 years but can be redeemed or encashed from the fifth year onwards. SGBs held in Demat form can be traded on stock exchanges between eligible investors.
Gold can undoubtedly be an essential part of one's investment portfolio. Choose from these fourinvestment optionswisely and benefit from the wealth-preserving properties of gold investment.
This definition is more appropriate for Gold Funds and not Gold Mutual Funds. Currently all Gold Mutual Funds invest in Gold ETFs.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
As a seasoned financial expert with a comprehensive understanding of investment strategies and a focus on precious metals, particularly gold, I'll delve into the key concepts and options discussed in the provided article. My expertise in finance extends to various investment vehicles, including digital gold, gold ETFs, gold mutual funds, and sovereign gold bonds.
Digital Gold: Digital gold, provided by entities such as MMTC-PAMP, Augmont, and SafeGold in India, is a virtual investment. It is certified pure, securely stored, fully insured, and its return is governed by the market price of physical gold. Digital gold allows investors to purchase in denominations as low as one rupee, offering the flexibility to sell at any time or opt for physical delivery.
Gold ETFs (Exchange-Traded Funds): Gold ETFs are mutual funds that track the domestic price of physical gold. These funds are listed and traded on stock exchanges, providing a safe and tightly governed investment option. The fund management company utilizes investors' capital to purchase gold bullion. Gold ETFs are known for their high liquidity, enabling investors to buy and sell units on the stock exchange, similar to trading stocks.
Gold Mutual Funds: Gold mutual funds invest in units provided by Gold ETFs. As the underlying asset is physical gold, the fund's value is directly linked to the gold price. This functions similarly to traditional mutual funds. It's important to note that the article might inadvertently refer to Gold Funds instead of Gold Mutual Funds, as they invest in Gold ETFs.
Sovereign Gold Bonds (SGBs): Sovereign gold bonds, issued by the Reserve Bank of India (RBI), represent grams of physical gold. These government-backed bonds are available through banks, post offices, and authorized stock exchanges. SGBs have a fixed tenure of 8 years but can be redeemed or encashed from the fifth year onwards. They offer an assured 2.5% interest per annum in addition to potential price appreciation in gold. SGBs held in Demat form can be traded on stock exchanges between eligible investors.
In conclusion, the article emphasizes the diverse investment options available for gold in the Indian market, catering to different preferences and investment needs. The choice between digital gold, gold ETFs, gold mutual funds, and sovereign gold bonds depends on factors such as familiarity with investment instruments, liquidity requirements, and individual preferences. It's crucial for investors to make informed decisions based on their financial goals and market understanding.
