Best Ways To Invest In Gold In India

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‘Rising gold prices’ is now a common phenomenon, rather for as long as one can remember, gold prices are always high! This gleaming metal is not just seen in high regard by jewellery lovers but also accomplished investors. Due to its features like high liquidity along with inflation-beating capacity, it is no wonder that gold tops the list of the most preferred investments in the country.

Investing in gold is not just beneficial, it is also very convenient. No matter how big or how small your budget is, there is something for everyone. 

If you too have been wanting to invest in gold but are uncertain how to start, here is an A to Z to help you get acquainted with investment in gold. 

Different ways to buy and invest in gold and comparative analysis:

There are many people who want to invest in conventional ways while some have a more modern approach. But gold is an option that can be equally alluring for both. Whether you like the traditional way of investing in physical gold or want to opt for paper gold, you must be aware of them both. Let us take a look at the ways in which you can invest in gold.

 

  1. Physical Gold:
    1. Jewellery
      For most Indians possessing gold is not just a social show-off but a cultural necessity. However, many buyers when purchasing jewellery have concerns about the purity, cost and design of the jewellery too. Paying making charges, that can go up to 25%, is an important factor as it greatly affects the price of the jewellery item, and if later in life you wish to exchange or return or sell this item,  the making charges are irrecoverable.

       
    2. Gold Coin
      Apart from your local jeweller, gold coins can be bought from various trusted sources like banks, non-banking finance companies and even online stores. Ingeniously minted coins with an engraving of the National Emblem of Ashok Chakra on one side and Mahatma Gandhi on the other side. Available in 5 grams and 10 grams, Indian Gold Coin and Bar is 24 carats pure, comes with 999 fineness and in a tamper-proof packing. 

       
    3. Gold Savings Schemes
      These days gold sellers offer gold saving schemes that make it easier for customers to invest in gold. You deposit a certain amount every month for a specific tenure. When the tenure is over, you can purchase gold from the same jeweller. Sellers offer a bonus from their side at the end of the term. In simple words, it is like a Recurring Deposit we open in a bank, only here you get to buy gold at the end of the term. It is also commonly called ‘Gold Kitty’. A few such schemes are:
      1. Tanishq Golden Harvest
      2. GRT Golden Eleven Flexi Plan
      3. Tanishq Swarna Nidhi

         
  2. Paper Gold
    Apart from investing in physical gold, there is another way of owning it. You can make use of gold ETFs (exchange-traded funds) and SGBs (sovereign gold bonds) or invest in gold mutual funds. Let us take a look at all these options.
    1. ETF
      ETFs or Exchange-traded funds are a cost-efficient way of buying paper gold. The selling and buying of gold happen in the stock exchange. It is a transparent process and the price at which you can buy or sell gold is nearest to the real price.

       
    2. SGB
      One more way of possessing paper gold is through Sovereign Gold Bonds. Issued by the government, the buyers get a weekly window every 2-3 months. If you wish to invest in SGBs, it is recommended to look out for the opening and buy as soon as possible. 

       
    3. Digital Gold
      ‘Digital Gold’ includes buying gold items like jewellery and coins online through mobile wallets such as Paytm and Goldrush etc. 

       
    4. Gold MF
      Golf funds or gold mutual funds invest either directly or indirectly in gold reserves. Gold MFs are considered to be a very convenient way of investing as you get to invest without actually having to buy an item in the physical form.

When you plan to invest in gold the first thing you need to keep in mind is your reason for investing. If you are investing for your child’s wedding you probably would want to invest in physical gold, however, if your aim is purely investment then paper gold may be the right choice. 

Why Should You Consider Investing in Gold?


For most people in India, buying gold probably doesn’t even need a reason. From the birth of a child to special occasions, from weddings to birthdays, from savings for children to an investment, gold has been the answer for just about every special event. However, investing in gold goes beyond cultural and religious reasons. Let’s take a look at the factors that work for gold:

  1. Eternally Valuable
    Apart from a few odd times, the yellow metal has always been a Store of Value. Gold has always been a cultural and social necessity. 
  2. Inflation Proof
    As the cost of living increases so does the price of gold. If you too are concerned about inflation affecting your profits, investing in gold might be a great option. 
  3. Something for Everyone
    Gold is for everyone. Even people from the most humble of backgrounds save up to buy gold. Depending on your budget, there is something for everyone. Even if you wish to invest in digital gold you can sell, buy and accumulate 99.9% of pure gold, starting from as low as INR 10.
  4. Liquidity-Anywhere in the World
    No matter what corner of the world you are, finding liquidity of gold is easy. It is also rather simple to see it in just about any currency and thus obtaining liquidity will always be easy and guaranteed. 
  5. Simplified Investing
    Buying physical gold is simple, even for the most naive investors. You probably do not have the expertise of a consultant or financial expert before making an investment. 
  6. Diversify your Investments
    When you diversify your investments, you can minimise the risks of going into a loss. Gold gives you multiple options when it comes to investing. You can invest in physical gold or gold bonds or gold mutual funds. 
  7. A Generational Investment
    If you wish to leave assets for your future generations, gold might be the right answer. Your children/ grandchildren and even your great-grandchildren would remember and appreciate you for such family heirlooms. 

 

Historical ROI of Gold

 

Speak to your parents or your grandparents and they would tell you that gold was always an expensive purchase. The prices of gold have always increased, except of course a few situations. If you see the performance of gold, it has always been considered a safe investment though, it must be remembered that prices of gold do not always escalate, especially when markets soar. Whenever the stock market seems to be going down, most investors turn to gold. 

Also, unlike bonds and stocks, gold is not an asset that generates income, its return is based on the appreciation of its price. In the past 15 years, there has been a 330% increase in the price of gold. 

Is it a Good time to invest in Gold now?

 

With gold prices at such a high, you might be wondering if it is a good time to invest in gold. But if you really come to think of it, gold prices are ‘always’ high. However, as an investor, you must keep in mind criteria such as as- liquidity, safety and probable returns. For some investors gold returns are volatile, but for most gold has proven to be a safe haven in the most unpredictable times. 

Gold not only provides you with liquidity, but the returns have always proved to be in line with inflation. Most experts consider gold to be one of the very few inflation-beating investments.

Things to keep in mind while investing in gold

  1. Research
    Just like all other investments, it is prudent to review your short-term as well as long-term goals before putting your hard-earned money into something. Try and find out all that you can so that you can weigh the pros and cons of investing in gold. 
  2. Safe Keeping
    Buying gold is only the first part of your investment plan, keeping it safe is equally important. Make sure you have a safe at home, else you can keep your physical gold in a bank locker as well. 
  3. Trustworthy Buyer
    Whether buying a gold coin or a piece of jewellery, always make sure that you check the purity of the item that you are going to buy. 24-carat gold is regarded as 99.9% pure, on the other hand, 22-carat is said to be 92% pure. It is recommended that you buy hallmarked gold and check for the BIS mark.
  4. Understand the Different Physical Aspects
    As discussed earlier, investment in gold doesn’t only mean buying physical gold such as jewellery or coins, it also stands for gold stocks and mutual funds. Gold prices are affected by a lot of factors, especially the economic conditions. Before investing in stocks or funds, make sure that you find out the company and the offered scheme in detail.
  5. Keep an Eye on Taxes

When you plan to buy or sell it is essential to understand how it is taxed. As per the recent income tax laws, taxation depends on how long you have held gold.

Tax Implications of Gold Investment


As mentioned above, when investing in gold, you need to stay alert about the tax implications that come with it. In our country selling gold attracts capital gains tax. In case you kept the gold for less than 3 years it is called STCG short-term capital gains and you are taxed depending upon the income tax slab you fall in. However, if you held on to gold for more than 3 years, it would be LTCG, long-term capital gains. You will have to bear a 20% tax. There are no tax benefits under section 80C on investing in gold.

How to Invest in Gold?

 

Now that you have read why you should invest in gold, your question may be, how to invest in gold. As discussed earlier you can either invest in physical gold or opt for paper gold. For physical gold, you can go to your local and trusted jeweller or a branded jewellery store. Private and government banks also sell gold coins, making them a safe buy. However, if you wish to invest in paper gold, a few of the top gold funds are:

  • Aditya Birla Sun Life Gold Fund
  • HDFC gold Fund
  • Axis Gold Fund
  • ICICI Pru Regular Gold Savings Fund

For making an investment in paper gold, there are certain requirements, such as:

  • You would be required to have a Demat account with the same firm
  • For am investment over INR 2 lakhs, you need to submit your PAN Card details
  • KYC Documents include one of the following:
    • Aadhar Card
    • Voter ID
    • Passport
    • PAN Card

Summing Up

Like all other investments, gold has its good and bad days, however, most of the days are mostly ‘good’. The benefits indeed are enthralling,  and thus investing in gold is certainly worth the weight. 

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