Buying gold is considered auspicious during Dhanteras. From jewellery to gold coins people plan their purchases around this time of the year. Huge crowds throng outlets with sales touching the year's peak. While jewellery is a good option for those who want to wear it as ornaments today, digital gold is a better option for those who want to pass it down to the next generation, giving them the choice to buy ornaments of their choice or even sell it as per their need. So, if you are considering buying gold for investment purposes here is a comparison of different ways of buying gold along with their costing. PHYSICAL GOLD Best way to invest in physical gold for investment purposes is through coins or bars because of low making charges. While buying a coin or a bar make sure that you go for the highest purity of gold, as the additives such as copper or silver corrode over time, which harms your investment. For jewellery, the purity is 18K or 22K as lower-purity gold is harder and more durable. However, in coins and bars, the highest level of gold purity is 24K or 99.99% Cost of buying physical gold: Gold coins and bars are more expensive than paper gold as it involves charges such as customs duty at 15 per cent, GST at 3 per cent and making charges around 5 per cent. But one of the biggest advantages is you physically possess the gold , unlike other digital options.
Also WATCH- Multi-baggers stocks 2022: Up to 10,000% return. Do you own any? DIGITAL GOLD Here you can buy gold online for as little as Rs 1 and for every rupee of gold purchased the equivalent amount of gold gets stored in the vaults of the company. You can either take the delivery of the physical gold or sell it online to book profits. But while selling keep in mind that frequent selling of digital gold will be expensive to you as it involves GST at the time of purchase. SEBI last year stopped entities that come under its regulation to stop selling unregulated products such as crypto and digital gold to customers. Currently, it is mostly sold by e-commerce platforms and fintech companies. “Digital gold refers to the online purchase of gold which gets credited to the online gold wallet of the buyer for which an equivalent quantity of gold is saved in a secured third-party vault. For several reasons, purchasing digital gold is more profitable as compared to physical gold. Primarily, purchasing gold physically involves additional making costs, which can be in the range of 5 to 20 per cent of the original value of the gold,” says Rachit Chawla, CEO & Founder, Finway FSC and Registered Financial Adviser with SEBI. Cost of buying digital gold: Unlike SGB, digital gold has GST charges of 3 per cent along with a mark-up-of upto 3 per cent based on the platform you are buying from.
GOLD ETFs If you have a Demat account, then you can invest in Exchange Traded funds or ETFs just the way you buy and sell shares. It also lends them high liquidity as they are listed on the stock exchanges. One gold ETF unit is equal to 1 gram of gold and is backed by 99.5 per cent pure physical gold bars. Cost of gold ETFs: Since gold ETFs can be bought on BSE/NSE using a demat account and trading account, a brokerage fee is applicable when buying or selling ETFs. There is no making charge and GST so the customers tend to benefit. GOLD FUNDS Gold funds invest in gold ETFs and are sold by mutual funds. Here, just like any other mutual fund scheme, NAVs are declared daily at the end of trading hours. These funds are suitable for those who don't have a Demat account but still want to invest in digital gold. However Cost of buying gold funds: Mutual funds charge expense ratio, which is the annual charge you pay to the mutual fund company for managing your investments in that fund. The Expense Ratio of the direct plan of the gold fund is generally up to 0.5 per cent. However, they are costlier than investing in gold ETFs as you have to bear the cost of both gold ETFs and gold funds.
SOVEREIGN GOLD BOND Sovereign Gold Bonds (SGBs) are securities denominated in grams of gold, which are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. Though there is a sovereign guarantee, there is no physical backing of gold in SGBs. What sets SGB apart from other digital assets is the fact that it also offers an interest rate of 2.50 per cent per annum. At the time of maturity, the gold value at current market prices is returned along with the interest income. Cost of buying SGB: There are no GST and custom prices added to the issue price and hence it is the cheapest way of buying gold. The issue price is decided based on the average closing price for the last three working days of the week preceding the subscription period. To decide rates, price of 999 purity gold is considered. Moreover, If you buy online then prices get reduced by Rs 50 per gram for those who subscribe online and make the payment through digital mode. Last but not least there are pros and cons of both physical and digital gold. For example, selling physical gold involves extensive authenticity checks and most jewellers tend to offer significantly lower offers than the market rates. On the other hand, digital gold can be sold anytime at real-time prices. But at the same time, there is no regulator for digital gold hence you need to be careful of the platform you are buying from.
Also read: Is the gold you are buying 99.9% or 99.99% pure?
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