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Shiny yellow metal isn’t just limited to physical touch to have an investment feel. In fact, there are now a wide range of gold investments that offer a sense of security and market-linked returns to gold-seeking investors. As its name implies, gold is indeed seen as an opportunity to hedge returns even in economic uncertainty. Gold is seen as a safe haven when inflation is very high, which generally results in a sharp correction in stocks. In the year 2022 has been no different yet with geopolitical tensions, inflation, supply chain disruptions and economic risks playing a major role in the market. However, gold itself has the potential to protect the investment.
Currently, there are five different options that you can invest in gold. These are gold ETFs, gold mutual funds, sovereign gold bonds, digital gold and physical gold.
To ensure your gold investment choice, consider the pros and cons of these options.
According to CA Manish P. Hingar, founder of Finto, for example, about having a demat account, only gold ETFs require investors to open a demat account before investing. The risk of theft or theft only concerns you if you invest in physical gold, because these are the only things you can physically hold. It includes gold bars, bullion, jewelry etc., although for digital gold, after some time you may have to take mandatory physical transportation, say 5 years or sell gold or pay extra.
Further, Finto founder explained that all these gold investments provide high liquidity. However, sovereign gold bonds have a lock-in period of 5 years. If the sovereign gold bond is held for up to 8 years, no tax is applicable on the capital gains. These bonds bear an interest rate of 2.5% semi-annually. For the rest of the gold investment options, STCG is levied based on your slab price, while LTCG is levied at 20% with index benefit. 3% GST is applicable on physical gold and digital gold only.
Issued by the RBI on behalf of the Government, Sovereign Gold Bonds are available to resident individuals, HUFs, Trusts, Universities and Charitable Institutions. The scheme has a tenure of eight years and offers a fixed rate of 2.50% per annum of nominal value. These gold bonds are also eligible for trading. They can also be used as collateral.
Explaining the benefits of sovereign gold bonds against their peers, Manish said there is no charge. Meanwhile, physical gold has made payments of around 20-25 percent. Gold ETFs have a brokerage fee of around 1%. Gold mutual funds also have an expense ratio of approximately 1 percent. Digital Gold includes additional charges of 3% for storage, insurance fees, etc.
Manish also pointed out that unlike gold ETFs and gold mutual funds, physical and digital gold are not regulated by SEBI.
Gold ETFs are like physical gold options, however, they are invested in physical form. Gold ETFs combine the flexibility of equity investments with the simplicity of gold investments.
Meanwhile, gold mutual funds are also regulated by SEBI and are open ended funds that invest in gold and gold related instruments like bullion, coins, etc. merchandise. You can invest in gold mutual funds through Strategic Investment Plan (SIP) and like other normal SIP investors can invest a certain amount every month for their future goals.
Thus, you can invest in these options at your convenience. Unlike sovereign gold bonds as SGBs only allow you to invest when they are open for subscription, which is usually 3-4 times a year. And if you are looking for a SIP investment, then gold mutual funds might be right for you.
According to Good Returns, 10 grams of gold is worth 22 carats. ₹49,950 from Sunday to ₹250 from the previous day.Also the 24 karat gold in the same gram rose. ₹270 to ₹54,490 against the previous day.
Disclaimer: The opinions and recommendations presented above are those of individual analysts or distributor companies and not of Mint.
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