2 min read.Updated: 17 May 2021, 01:49 PM ISTNamrata Patel
The digital methods of investing in gold such as sovereign gold bonds and gold exchange-traded funds are more advisable in times when going out of the house has become difficult due to covid
This year, more and more investors are looking at the digital route to invest in gold as covid restrictions are preventing them from shopping for physical gold. In this piece, we explore the different ways in which one can invest in gold and the advantages of each mode of investment.
Be it physical gold or digital gold, there are various reasons one can invest in the yellow metal. “Gold is an important asset to have in your portfolio. Different asset classes perform differently at any given point of time, and gold tends to perform well when the equity markets are not doing well and are very volatile. Thus gold is a great investment in times of economic crises such as the current one. An investor can diversify his/her portfolio by investing up to 10% of his or her portfolio in gold," says Mrin Agarwal, a financial coach and the founder of Finsafe India Pvt. Ltd. This quality of gold to provide a hedge against the volatility of equity investments has seen the prices of the precious metal touch record highs in the past one year.
So if an investor wants to invest in gold, what are the options available?
“There are different ways to invest in gold. The traditional way is to buy jewellery and gold coins," explained Mrin. In addition to problems of safekeeping, liquidity and purity, the overhead making charges between 20% and 30% make physical gold undesirable as an investment, she said. It is advisable to look at physical gold only for consumption.
“The digital methods of investing in gold such as sovereign gold bonds (SGBs) and gold exchange-traded funds (ETFs) are more advisable in times when going out of the house has become difficult due to covid. Both these investment products are low-cost and time-efficient. SGBs are more tax efficient with the amount on maturity being tax-free and only the interest of 2.5% paid annually being taxable.
So if you do wish to have some part of your portfolio in gold, and are okay with the 8-year lock-in period, you can have a look at the SGB tranche opening on 17 May 2021, wherein you can invest in gold at the price of ₹4,777 per gram and if you apply online the issue price is reduced by ₹50. This tranche of SGBs is open for investment up to 21 May 2021 and the investment can be made from banks (except small finance banks and payment banks), Stock Holding Corporation of India Ltd, designated post offices, and recognized stock exchanges, namely National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd.
Listen to our podcast on the various options for gold investments and the latest Sovereign Gold Bond offer on the link below: https://www.htsmartcast.com/single-episode/business/-investments-in-gold_b1d1ed5e-4de0-444b-8789-08a8f3cc2c14/