4 popular ways of buying gold as an investment option

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 various gold saving schemes available in India besides purchasing gold coins, bullion, and jewellery, the best option to invest in gold would depend on preferences and factors such as the amount of investment and the need for liquidity. Digital gold is a virtual investment, whereas gold ETFs and gold mutual funds are more suitable for people familiar with stock and mutual fund investments. On the other hand, sovereign gold bonds offer a government-backed investment option in gold.

The options are aplenty; however, let us look at each form of investment in detail.

Digital Gold
 

Digital gold in 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 gold is certified pure, stored safely, and fully insured, and the market price of physical gold governs the return on this investment.

You can buy digital gold of denominations as low as one rupee, sell it back at any time, and even opt for physical delivery.

Gold ETFs
 

Gold ETFs are mutual funds that track the domestic price of physical gold. The fund management company uses your investment to buy gold bullion. As gold ETFs are listed and traded in stock exchanges, investing in gold ETFs is safe and tightly governed. You can buy and sell  units of gold ETF on the stock exchange on the same day or 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 ETFs have 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 bonds are 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 through IDFC 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  scheme has 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 four investment options wisely 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. 

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