Best Investment Options – 3 Ways to invest in Gold

Overview about Investments in Gold
An investment in gold has given very good return over years. Whether one is rich or middleclass or poor, everyone likes to invest in gold.
Gold can be purchased either physical gold (Gold coins and Gold Bars) or purchasing ETF’s  / Mutual Funds. Gold investments gave return of 1300% in the last 12 years.
See the below table to see how the gold investments gave the returns in the last few years.
 
 Gold history

 

Year
Gold Rate in Rs (22K)-1 Gram
Gold Rate in Rs (24K)-1 Gram
1990
219
219
2000
450
450
2010
1927
2072
2012
3020
3040
 
 
 
 
 
 
 
 

 

 

Now the question is how & where to invest in the Gold. There are various ways of investing in gold
a) Investing directly in physical gold (Purchasing Gold bars or gold coins)
b) Investing in Gold ETF’s (Exchange traded funds)
c)  Investing in Gold Mutual Funds
 
 a)      Investing directly in physical gold (Purchasing Gold bars or gold coins):
One can invest money by directly purchasing in gold ornaments, gold bars and gold coins. There are various drawbacks for this like loss due to theft, wastage due to wear etc.,
 
b)      Investing in Gold ETF’s (Exchange traded funds)
One can invest directly in another form like buying Gold ETF’s (Gold Exchange Traded Funds).
1)      These are the ETF’s which can be purchased through National Stock Exchange (NSE) in the electronic form.
2)      One need to have demat account to buy gold in this form.
3)      We can buy gold ETF’s as low as 1 Gram and in multiples of 1 Gram
4)      These Gold ETF’s are in demat form and no worry like theft
5)      There is no wastage like gold ornaments
6)      There is no maximum limit to purchase such gold ETF’s
7)      The ETF’s are valued every day based on the gold rates of the market
 
c)      Investing in Gold Mutual Funds
One can also invest directly in another form like buying Gold Mutual Funds
1)      These are the Mutual Funds s which can be purchased through through the mutual Fund companies which offer these schemes in the electronic form.
2)      One m ay or may not have demat account to buy gold in this form.
3)      We can buy gold MF’s in units. The units are measured based on the total value of the mutual funds over the mutual fund units sold by the mutual fund companies. This is called NAV (Net Asset value).
4)      The amount invested in mutual funds can be as low as Rs.500 and need not purchase the least value of 1Gram (which is offered by Gold ETF’s)
5)      There is no wastage like gold ornaments
6)      There is no maximum limit to purchase such gold mutual funds
7)      The mutual funds are valued every day and publishes the NAV
 
Now the question, which is the best investment option for gold in above specified options. This depends on the investor requirement.
a)      Every investor can buy some physical gold in frequent intervals and not at one time (depending on the amount to be invested)
b)      Future investments can be done month on month in Gold Mutual Funds through Systematic Investment Plan (SIP). SIP is the scheme where fixed amount can be invested on specific date for a period ranging from 6 months to 4 years.  Here one can choose as low as Rs.500 and there is no maximum limit.
c)       If any investor is looking for quick liquidity, they can choose Gold ETF’s. The sale value of the gold ETF’s sold during the day would be credited to bank account within 3 working days. One can also sell “SPOT” Gold ETF’s where with little higher brokerage charges, the sale amount can be credited in the bank account within same day.  In case of mutual funds liquidity, it would take anywhere 4-5 working days from the date of selling the mutual funds depending on the mutual fund companies.
 
Have you enjoyed this post ? Please provide your valuable comment to improve the quality of the posts.
 
Suresh
Myinvestmentideas.com

4 comments

  • Rishan Awasthi

    Hi Suresh,

    I'm planning to invest in Gold ETFs this year. I wanted to know the difference between ETFS and Gold Mutual funds, are the same or there is any significant difference?

  • Nadeem

    Dear Suresh,

    Thanks much for the info. I'm planning to invest in Gold ETF. However, I'm not sure which Demat account I should go for?

    Would you please suggest me the Best Demat account only for investment in Gold ETF with minimum charges?

    Also, SBI advertises that we don't need Demat account for Gold ETF (SBI GOLD FUND).

    Please specify what's the differece between SBI GOLD FUND & SBI Gold Exchange Traded Scheme.

    Thanks in advance.

    Regards,

    Nadeem

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