Gold – A Smart Investment Option (Part II)

Buying Physical Gold:  It is the most traditional and preferred way of investing in the precious metal. There are two ways to invest in physical gold:

•  Jewellery 

a.       Popular, easy to invest with cash or cheque

b.      Involves making charges which are not recoverable during sale

c.      Concerns of purity and also has the risk of theft

•  Bars, Coins & Biscuits

a.       Lucrative investment option popular as savings for marriages

b.      Comes with a tamper proof cover and hence, has better re-sale value

c.      Can be purchased from banks and jewelers but cannot be sold back to bank

Exchange Traded Funds: ETF basically is like any other stock traded on the stock market and just as a stock has a company behind them ETF is backed by the asset gold. With a demat Account one can invest in Gold ETF units, which are typically equivalent to one gram gold.

•  Advantage of high liquidity minus the hassle of stocking gold. It involves fee for the investment called brokerage.
• Attracts less taxation during the long term capital gain arising out of its sale if it is held for a year as compared to physical gold which needs a holding period of 03 years.

Mutual Fund Schemes: These are conceptually similar to any mutual fund, however here the investor’s money is invested into gold. One can invest in these mutual funds wither as a lump-sum or through the SIP route.

• Investment possible through systematic monthly payment without any demat account
• It is investing in the mutual fund scheme investing in Gold ETF
• Although, there are no requirements of demat account, there are Fund Management charges, and charges of the underlying scheme 

Gold Future: Another way to invest in gold through commodity exchanges, though a little riskier. The purchase is done for future at price determined today, assuming it is going to rise at that point of time.

• Recommended for those with high appetite for risk & sound knowledge of the market

E-Gold:  Here you invest in gold online. One needs to have a demat account with authorized company registered with NSEL for trading online.

• Offers better liquidity and the option of taking physical delivery of gold

Read the first edition of Gold – A Smart Investment Option (Part I)