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Pros and cons of different ways of investing in gold.
Gold has always been one asset that has been sought-after by generations. Considered one of the most precious commodities, owning gold as an investment option has been a traditional choice for many. Gold acts as a hedge against inflationary tendencies and offers a good balance in your portfolio; gold as an investment has proven to be a good choice when other assets are performing poorly.
However, there are many ways in which you can invest in gold. Here are the pros and cons involved in the different ways of investing in gold.
As jewellery: Gold is bought in the form of jewellery for both investment and emotional reasons. The advantage of buying gold in the jewellery form is that you know it is always with you in times of need. A major disadvantage is that because of the emotional quotient involved, not many may prefer to sell gold at any point in time. Storing and safety are huge concerns when one considers gold jewellery as a form of investment. If you are looking at gold as an investment option, this is not the best way to go about it because jewellery also involves making charges.
Gold ETFs: Gold exchange traded funds (ETFs) don’t involve buying physical gold and can be bought or sold on the stock market. The advantages of gold ETFs are that they are safe, convenient and don’t involve storing them. You would need a demat account and you can buy them much like you would buy an equity share on the stock market. You can also buy gold ETFs at a low quantity, as a single unit, which equates to one gram. The cons of buying gold ETFs is their lack of liquidity. You also have no option of taking physical delivery of the gold. Also, gold ETF returns may not match or reflect actual returns that gold gives.
Sovereign gold bonds: Sovereign gold bonds are issued by the Reserve Bank of India, and are available in multiples of one gram. The pros of investing in SGBs are that their price matches closely with the price of actual gold. They are also a convenient option and there’s no hassle of storing physical gold. They also fetch you a guaranteed interest. SGBs are tradable on the exchange much like you trade shares in the stock market. Talking about the cons of investing in SGBs, you must know there is a specific investment period of eight years, which is a long time for many considering investing in gold. The exit option is only available after the fifth year. Thus, their liquidity is limited.
E-gold: When you look at gold as an investment option, e-gold is among the best options. E-gold or digital gold is held in the demat form and allows you to convert it into physical gold as and when you need it. motilal It is a liquid option and you can buy and sell it anytime and anywhere. The pricing is highly transparent and connected to global rates. This is a form of investment that combines online and physical forms of investment, and offers you the best of both worlds. You would need to open a demat account before you go ahead and invest in digital gold.
While owning physical gold can be cumbersome and not secure, owning gold as an exchange traded fund or as a sovereign bond means your investment is hassle-free, convenient and doesn’t involve storing gold safely. However, there is no physical delivery of gold, so it doesn’t feel like you actually own gold. The third and best choice is to combine the physical and electronic versions, and go for e-gold. With e-gold, you buy online, your gold is stored safely and you can transact without having the physical version with you. However, if you seek delivery, the gold you own will be delivered to you. E-gold is a good investment choice that offers you hedge against inflationary forces and also adds balance into your investment portfolio. So, what are you waiting for? Open your demat account, pick an amount you can afford and begin your digital gold investment journey.