This Dhanteras, buy digital gold!
As per Hindu popular belief, buying gold during Dhanteras is considered auspicious. Otherwise also, in our country, gold is considered to be a safe investment. Therefore, we, Indians, prefer buying gold jewellery or accumulating gold coins on such auspicious occasions.
In recent times, gold as an investment has given spectacular returns, which otherwise was dormant for quite a long time. Further, investment in gold is considered to be a good hedge against inflation. Also, they are negatively correlated to equities. Hence, when the equities witness steep volatility as it was witnessed in March this year, gold does shine. So, if you are looking to buy gold in this Dhanteras, then buying digital gold would be much more beneficial. Here is a short guide to know how to invest in gold digitally.
Sovereign Gold Bonds
Issued by Reserve Bank of India (RBI), Sovereign Gold Bond (SGB) is denominated in the multiples of grams of gold with the basic unit being one gram. The minimum investment of one gram is mandatory. Further, apart from capital appreciation, these bonds also offer 2.5 per cent of the annual interest to its investors. Though, investors need to bear in mind that this is a simple interest in the principal amount. On the maturity front, these bonds mature post completion of eight years and one can exit from them only after the fifth year of investment. The redemption depends on the prevailing gold price at the time of redemption. The eighth tranche of SGB is open now and would be closing today i.e. on November 13, 2020.
Gold Mutual Funds
Gold mutual funds basically are open-ended fund of funds (FoF) that invests in units of gold exchange-traded funds (ETF). In order to invest in them, neither do you require a Demat account nor any middle-man. You can directly invest in them by visiting the respective asset management company’s (AMC) website wherein, you only require being a KYC compliant, having a PAN card, and entering bank details. Some mutual funds also offer funds, which invest in international gold. However, frankly speaking, you don’t need to have exposure to it, as it adds additional currency risk. Funds investing in domestic gold are more than enough.
Gold ETFs
Gold ETFs are basically the funds that invest in physical domestic gold and are listed on exchanges. This means that you can trade them like shares. Every single unit of gold ETF represents half a gram of 24 carats of physical gold. As these can be traded on exchanges, it provides great liquidity as they can be sold anytime during trading hours. Further, they are traded at prevailing market prices of physical gold. Hence, investors get a chance to buy or sell gold at the market price without paying a premium on purchase or selling at a discount.
Though, if you are someone, who wish to hold physical gold just for investment purpose, then digital gold would be a better option over physical gold. However, if you are going to take gold from the usability perspective in the near-term, then physical gold would be an ideal choice over digital gold.