Investing in Gold

Seemingly simple questions like “How should I invest in gold?” do not have simple answers. However, dismissing it isn’t entirely fair either. 

Gold may not be a great builder of wealth but its ability to maintain value over centuries makes it remarkable. But does this mean you should start hoarding gold jewelry?

Watch our video to know more!

All that glitters is not an investment!

We often tend to believe that gold jewelry is an investment. However, we neglect the liabilities that gold jewelry or physical gold, for that matter, brings. Not to forget, the fear of theft is inevitable. Gold jewelry is a luxury and is consumed and hence, can not be categorized as an investment. 

Gold jewelry or physical gold comes with a huge mark-up. 

Firstly, upon buying physical gold, a 3% GST is paid. Then making and design charges erode the value of gold. Since gold is in physical form and needs to be stored and protected from damage and theft, a small price is also paid for storage and insurance. These additional costs are impossible to recover while selling any gold jewelry. Thus, while painting the bigger picture we realize how gold jewelry is a big NO.

Some investors often mistake physical gold as an investment option too. You may think that gold coins and bullions don’t fetch making and design changes, but we can’t ignore the storage and protection charges, the GST that follows. Physical gold could be an alternative when you know for sure that you will have to convert it into a luxury (gold jewelry) at some point

It’s time to go Digital!

In today’s time, if you are a smart investor, you will realize the benefits that you can enjoy by investing in digital gold. It’s hassle-free, fairly valued, and a pure form of investment. Although, there are various ways of investing in Digital Gold, and having choices is great but it does lead to confusion. Here’s your go-to guide to investing in digital gold!

Sovereign Gold Bond

Sovereign Gold Bond

Sovereign Gold Bonds are RBI mandated certificates issued against grams of gold and are regarded as one of the most lucrative ways of investing in gold. They are priced at the prevailing market rates of gold and also come alongside an added interest payment of 2.5% on the issue price until the maturity period – 8 years. An added bonus is that investors of SGB do not have to pay a capital gains tax on the maturity of this instrument if it is bought through primary issuance. 

So if you are looking at making a lump sum, long-term investment in gold with an added interest income of 2.5% per annum, SGB is for you!

Gold Mutual Fund

Gold Mutual Fund

These are mutual funds that directly or indirectly invest in gold. Gold Mutual Funds invest in the shares of gold mining and distribution companies, physical gold, and Gold ETFs. It is a convenient way to invest in an asset without having to purchase the commodity in its physical form. Gold Mutual Funds are suitable for investors who want to make small investments in gold or are looking for a short-term investment option. You can also make regular investments in Gold Mutual Funds by starting a SIP.

Click here to start investing!

Gold Exchange Traded Funds (Gold ETFs)

Gold ETFs

These are exchange-traded instruments that invest in 99.5% pure gold. None of the taxes levied on physical gold purchases are applicable with this investment instrument which also happens to offer safety and efficiency at the same time.

Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company and can be bought and sold continuously at market prices.

These are ideal for investors who are looking for ultra-short-term investment/trade options or are looking for an investment that offers easy liquidity. 

Digital Gold Plan

Gold Digital Plan

Digital gold is a convenient and cost-effective way to accumulate yellow metal. It enables you to buy, sell and accumulate pure gold in fractions anytime and anywhere. You can invest in digital gold with as little as ₹1!

Digital gold can be bought online and is stored in insured vaults by the seller on behalf of the investor. All you require is Internet/mobile banking and you can invest in gold digitally anytime, anywhere.

Tax Implications on Gold

The tax implication mostly remains the same across instruments. If gold is held for less than 36 months, the tax is as per slab rates. Whereas, if gold is held for more than 36 months, a flat 20% tax rate is charged with indexation benefits along with surcharge(if applicable) and cess of 4%. 

Only in the case of SGBs, the above-mentioned sustain if the instrument is sold after 5 years but before 8 years. Otherwise, the interest income is completely taxed while the corpus received upon maturity is tax exempted. 

Gold is a safety net that you must incorporate into your portfolio. So, invest in intrinsic gold like Digital Gold, Gold Funds, Gold ETFs, or Sovereign Gold Bond; and that will keep you away from fools’ gold.

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