Gold-Ways of Investments

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Today I will share my knowledge about ways of investing in gold.

1) Physical Form: This is the one of the oldest and favourite way of gold investment in India. However, when you buy gold in physical format it includes making charges and wastage. Main disadvantage is pricing, which vary from shop to shop. Hence, you will not get the standard price, which is on spot market. Quality of the gold is also not sure. Biggest disadvantage is safe keeping of physical gold. So it is inconvenient to buy, sell and for safekeeping. Suppose now you are buying gold for the future use of your daughter’s need (which is around 15 years from now) then gold ornament, which you purchased today, may be old fashion at your daughter’s marriage. Therefore, at that time you need to alter your existing gold ornaments, which will cost you more in the form of making charges and wastage. It may also cost you in the form of wealth tax if your total wealth crosses 30 lakh. Hence, for investment purpose this is not best way.

2) In the form of Bars and coins through Banks: This also have same features, as that of physical form of purchasing with additional disadvantage being resale may not be possible. Hence, even though you may get purity assurance, this format of investment still has few disadvantages.

3) Gold ETFs: Your investment will be in Dematerialized format. Hence, safekeeping of your gold will not arise in this case. Purity issue will not exist here as you keep in e format. Reselling is not the issue; easily you can liquidate in secondary market. Convenience of buying, selling and storage is very high. Pricing linked to International Gold Price. Hence, currency risk is more. You need to pay some annual recurring expenses like storage, Insurance and AMC Expenses. As of now, physical delivery of Gold is only from Bombay. Therefore, if you want to take physical delivery then it may be time consuming. It is a recommended way of investment except disadvantages being currency risk, annual expenses and physical delivery inconvenience. Tax Advantage is, it is treated like any other financial product. Hence, Long Term Taxation will apply after one year.

4) Gold Mutual Funds: These are actually Funds Of Funds. Usually AMCs will invest into their own Gold ETF products. Hence, in terms of cost these are costlier compare to Gold ETFs. However, few advantages are-no requirement of Demat Account and even small amount like 500 can be possible for investment.

5) E-Gold: This is emerging and favourable way of investment. Price linked to Indian Gold Prices. Therefore, currency risk is nil. In terms of cost, this is cheapest of all forms of investment. No recurring expenses like Gold ETFs.  Physical delivery is convenient as presently around 15 delivery centres available. E-Gold considered as physical asset. Hence, for taxation purpose Long Term Capital Gain will arise only when you hold this format of investment for more than 3 yrs. However, this is advisable to invest in E-Gold, as in terms of buying, selling, security, pricing and purity are highly convenient compare to other forms of investment.

Note-Currently, you no longer allowed for investing in E-Gold due to issues with NSEL.

So now, decide which is best way to invest in Gold to diversify your investment Portfolio.

8 Comments

  1. Is it advisable to invest in any form of Gold?
    From whatever information I can gather, rate of returns are very low compared to Even Bank FD’s.

    Reply
    • Dear Vineeth,
      If returns are lower than Bank FDs, then that love to invest in GOLD?

      Reply
  2. Is e-gold still preferable considering the NSEL fiasco?

    Reply
    • Muthu-You can’t invest now. So need to think about preference 🙂

      Reply
      • you need to take it out from the article or atleast update.

        Reply
  3. Yes Dev, if you think gold as investment then it is always preferable to go with E Gold. Thanks for your reading. Hope you will enjoy my future postings too.

    Reply
  4. This is very much informative. E Gold investment looks better when compared with other Gold schemes/investments……

    Reply

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