In an earlier article we have seen why gold should find a place in your investment portfolio as it is less volatile and a safe heaven in unsettled times. Herein we will look into different means through which a retail investor in India can invest in gold.
Jewellery :
Most obvious means is buying jewellery, which is both auspicious (for religious reasons) and a necessity (for marriage and other social functions)
in Indian context. Thus jewellery has sentimental value which takes precedence at times. However, purely from investment prescriptive this is not prudent because of many disadvantages - cost of craftsmanship in addition to the gold, impurity risk, low liquidity, security concerns.
Gold bar/coin :
Gold coins and bars are probably the best way of investing in physical gold. These can be purchased at banks and come with an 'assay certification' which guarantees that they meet the international standard of purity. This option also has some disadvantages like security concerns, storage hassles. Most banks including ICICI, HDFC sell gold in different denominations.
Gold coins and bars are probably the best way of investing in physical gold. These can be purchased at banks and come with an 'assay certification' which guarantees that they meet the international standard of purity. This option also has some disadvantages like security concerns, storage hassles. Most banks including ICICI, HDFC sell gold in different denominations.
Gold ETF :
From investment prescriptive, gold exchange traded funds (ETF) are however the most convenient option for retail investors to invest in gold. The money invested in gold ETFs is used to purchase physical gold of equivalent value. The advantages of ETFs are that the fund house takes over the responsibility of storage and insurance of this gold, liquidity is high, making charge is not incurred. Gold ETFs are also tax efficient unlike physical gold. Currently 6 asset management companies ( Benchmark, kotak Quantum, Reliance, SBI, UTI) are providing such funds.
From investment prescriptive, gold exchange traded funds (ETF) are however the most convenient option for retail investors to invest in gold. The money invested in gold ETFs is used to purchase physical gold of equivalent value. The advantages of ETFs are that the fund house takes over the responsibility of storage and insurance of this gold, liquidity is high, making charge is not incurred. Gold ETFs are also tax efficient unlike physical gold. Currently 6 asset management companies ( Benchmark, kotak Quantum, Reliance, SBI, UTI) are providing such funds.
Following tables provides a comparative matrix of the 3 options:
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This option also has some disadvantages like security concerns, storage hassles. Most banks including ICICI, HDFC sell gold in different denominations.
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