If you are looking to invest in gold, there are many options available in India to invest in gold.
Read on to know more!
Digi gold or Digital gold is purchased online in a non-physical (digital) form. It protects the downsides of buying physical gold. There are no issues relating to purity, no danger of theft, no extra costs for storage, and you can buy it right from your mobile.
The Digi gold bought by investors is stored in insured vaults by the seller on behalf of the investors. Customers can buy digital gold from various mobile e-wallets, apps, or brokerage houses available in the country. Once the customer buys digital gold, the selling/ trading companies purchase an equivalent quantity of physical gold and store it under the investor’s name in the secured and insured vaults.
Indians love possessing gold in physical form. The traditional way to buy gold was to purchase it in the form of jewelry, coins, bars, etc. People prefer physical gold as they have sentimental value attached to it and it is also seen as a security for emergencies.
The Government of India has introduced the Sovereign Gold Bond (SGB) Scheme to provide investors with an alternative to investing in gold. Thus, SGBs are government securities and come under the debt category. The bond denomination is valued in grams of gold. The maturity duration of the gold bond is eight years, and interest at the rate of 2.5% on the nominal value is paid on an annual basis. There is an option to exit the gold bond after the end of the fifth year.
Interest earned on gold bonds is taxable as per the Income Tax Act. However, the redemption proceeds received after eight years are exempt from capital gain tax if the investor is an individual. No wonder Sovereign Gold Bonds are becoming popular amongst new age investors.
Gold ETF is an Exchange Traded Fund is an instrument that invests in gold bullion and tracks the gold prices. It is a passive way of investing in gold which may be in a paper or a dematerialised form. Gold ETFs are listed and traded on both the exchanges, i.e. NSE and BSE, hence, can be bought and sold at market prices like any other stock. A Gold ETF gives the dual benefits of flexibility and simplicity of investing in gold.
Gold mutual funds are another convenient way of investing in gold without purchasing it in physical form. Gold mutual funds are a category of mutual funds that invests in Gold ETFs, stocks of gold producing companies, physical gold, and/or stocks of gold mining companies.
The fluctuation in the prices of gold impacts the NAV (Net Asset Value) of the fund. Investment in gold funds is also done as a part of diversification or to get the right asset allocation. Individuals can divert their funds into gold funds if there is uncertainty in the markets. Investment in gold mutual funds not only gives exposure to gold as an asset but also the services of professional management.
Gold works well as a hedge against economic downturns, so it makes sense to include gold in your investment portfolio. You could invest anywhere between 5-15% of your portfolio in gold. The mode of gold investment should also depend on your need.
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