Gold Investment – How to Invest, Options & Benefits

Gold Investment
Gold Investment

For many centuries The Yellow Metal has remained one of the most sought after things for human beings. Even today it is the most preferred investment option in the entire world. Gold not only has an attachment with any individual as a tool to park money but also it has an emotional attachment.

For many centuries The Yellow Metal has remained one of the most sought after things for human beings. Even today it is the most preferred investment option in the entire world. Gold not only has attachment with any individual as a tool to park money but also it has emotional attachment. The importance of gold has been of great value as it is considered to be an option to preserve wealth for generations. Gold is able to fight inflation with good might and thus provides a hedge against inflation.

In this article we will explore Gold as an investment option:

(1) What are the different ways to buy gold – Investment in Gold is not limited to buying Gold in form of jewellery or ornaments. Today there are various other modes of investment in Gold.

  • Physical Gold and Jewellery – Gold in physical form can be bought as jewellery, coins and bars. Jewellery involves making charges, while there are no making charges for coins and bars. Sometimes charges are also there for safekeeping pf physical Gold like rent for bank lockers etc. However no paper work or demat account is needed for investment in physical Gold. While selling jewellery there are always deductions on account of impurities and actual realized amount is always lesser than the market value.
  • Gold Exchange Traded Fund (ETF) – Gold ETF is a mutual fund whose units are traded on stock exchange. For investment gold ETF demat account is required to be opened. Whereas there no other charges like making charges, but brokerage charges are there however they are very low as compared to making charges. Moreover investor does not have to worry about safekeeping charges. Whenever investor wants to redeem the amount, that request is processed very easily at the market rate without any hidden charges. These features make ETF the best and most transparent investment option for gold investment.
  • Gold Mutual Fund – It is type of mutual fund in which money is invested in companies engaged in gold mining and extracting. Investments are made just like any other mutual fund. Moreover fund management charges are also on the lower side.
  • Digital Gold – Digital Gold is the newest way to buy gold online. Some companies like PAYTM, Phonepe and Goldrush of Stock holding corporation are giving avenue to investors to buy gold digitally. There is no minimum prescribed amount to invest in gold. Minimum amount usually starts from Rs. 1/-. However investors have option to get the digital Gold converted in Physical Gold Coins when the invested amount reaches minimum one gram market value of gold.
  • Sovereign Gold Bonds (SGB) – To curb the demand for physical gold central Govt. has launched Sovereign Gold Bonds. SGBs are government securities denominated in grams of gold. These bonds act as a substitute for physical gold. SGBs are normally purchased through banks and are held in demat form. Interest of 2.50 %( Per annum) of invested amount is paid to investor in every six years. These bonds have a lock in period of eight years and have an early exit options at the close of 5th, 6th and 7th years .

(2) What are the advantages of investment in gold – Gold is more than just an investment option to many of us. It has deep rooted significance in human history. Gold has attracted people almost from every walk of life. It is not only important from the viewpoint of returns it generates for us but also from the emotional bond that is normally passed from one generation to other. It may be difficult to mention all the advantages of investment on gold, some points are discussed below:

  • Wealth Preservation – It is normally not easy to spend Gold, as people tend to keep that as the last resort. This makes Gold a great tool to preserve wealth and investment in gold is normally done keeping in mind longer time duration.
  • Diversification – Investors normally approach for diversification of their investment to avail protection during hard times. Gold is considered to be a valuable asset class giving investors the much needed diversification.
  • Hedging Tool – In uncertain times gold acts as hedging investment option helping investors protect their portfolio. Investors across the globe tend to buy Gold when everything else is falling. Gold always acts as insurance in times of distress like an earthquake, currency crises, economic risks or government failures. Such things help the Gold prices soar higher and therefore giving rise to capital invested. It is one of the most commonly traded assets in entire world which automatically becomes more valuable from time to time.
  • High Liquidity – Investment in Gold is highly liquid (Except Sovereign Gold Bonds) as it can be converted into cash. It normally involves no or minimal paper work.

(3) How has been growth of Gold – It is difficult to attach Gold investment with only returns, because Gold has been something more than just an investment for each family. In last twenty years, the annualized returns on Gold has been more than 12%. Such returns beat inflation with good margin.

Gold just not acts as an investment. It also acts as a mental comfort giving agent. It gives a sense of protection. For all such reasons, gold will continue to remain the most common and one of the most valued assets in the world.


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