Akshaya Tritiya: What are the gold options to invest in?

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Akshay Tritiya is just a day away. It’s a day when many Indians buy gold to celebrate this auspicious occasion. While traditionally people buy the yellow metal, nowadays one has the option of choosing from a range of gold investments as well.

Consider that you have Rs 1 lakh to spend. Let’s check the options you have.

Physical gold

After a sharp decline in prices from the levels of Rs 58,000 for 10 grams in August 2020, the price of the yellow metal has again started climbing back towards Rs 50,000 levels.

On May 12, the price of gold stood at Rs 49,000/10 gms. So if you have Rs 1 lakh, you would be able to buy about 20 gms of the metal.

Gold is not only considered auspicious but is also seen as an investment tool against inflation and security in times of crisis.

Suvankar Sen, executive director, Senco Gold & Diamonds said that this time unlike last year the activity is picking up and we are hoping for better demand this Akshay Tritiya.

To cater to the demand of customers, many companies have launched attractive online buying and Flexi gold offers. It is also giving a special discount to the customers.

Gold ETF

Gold Exchange Traded Funds (ETFs) are primarily paper gold. The money you invest will be pegged to 24-carat gold. To invest in these ETFs, you need to open a Demat account.

Gold ETFs invest in 99.5% pure gold bullion, which is equivalent to holding the physical gold.

An investor may buy as low as one unit and the expenses associated are much lower when compared to physical gold investments. Gold ETFs are highly liquid compared to physical gold.

Some are the popular gold ETF funds are Axis Gold ETF (NAV-Rs 41.59), Nippon India gold ETF (NAV-Rs 41.39), UTI Gold ETF (NAV-Rs 42.35), ICICI Gold ETF fund (NAV-Rs 42.42). NAV stands for Net Asset Value of a unit.

It means if you have Rs 1 lakh to invest, then you can buy about 2380 units of any gold ETF.

Gold Bond

Sovereign Gold Bonds or SGBs are government securities issued in multiples of one gram of gold. These bonds are issued by the RBI on behalf of the government and are traded on a stock exchange or banks or post offices.

For long-term investment, Sovereign Gold Bond is seen as a better option than Gold ETF.

One can buy it from any commercial bank, Stock Holding Corporation of India, and post offices.

One can hold it for a period of 8 years, but there is a lock-in period of 5 years.

RBI launched the 12th tranche of SGB priced at Rs 4,662/gm on March 1, and it will give you a fixed return at a rate of 2.5% per year.

But the rate varies every day. Consider you have Rs 1 lakh to invest, and then you can buy 21 gold bonds when it was issued. But if you have decided to put your money in these bonds first check the price in the market and go for it.

Gold mutual fund

Gold mutual funds are open-ended portfolios based on the gold ETF units. Gold mutual funds are better in every way, with advantages such as low minimum investment amounts, diversification, SIP options, etc.

Individuals can invest as low as Rs. 500, making these funds accessible to them. It gives an investor more options than buying physical gold, which can be very expensive.

Some are the popular gold mutual funds are Axis Gold fund (NAV-Rs 14.64), Kotak Gold fund (NAV-Rs 19.59), SBI Gold Fund (NAV-Rs 14.65), ICICI Prudential Regular Gold fund (NAV- Rs15.60) and Invesco India Gold Fund (NAV- Rs 14.33).

If you have Rs 1 lakh to invest in a single time, then you can buy more or less 6600 units of any gold MF.

“Investment in gold is no doubt one of the best avenues. But currently one has other options as well. One could invest in gold through gold ETF or gold mutual fund because the returns are attractive and one has the option of investing as low as Rs 500,” said Arindam Saha, former eastern regional head of MCX and current director of Vista Intelligence Pvt Ltd.

Digital gold

One can buy e-gold through any e-wallet like Paytm or PhonePe. The quantum of investment can be small as in SIP. Once you accumulate the minimum units you can sell it online at prevailing gold rates or get the equivalent physical gold delivered at home.

The risk of investing in digital gold is that there is no regulator that would watch out for the quantity and purity of gold maintained.

Another important thing is that just like physical gold one has to pay GST on e-gold over and above the spread charges of 2-3%.

The spread charge is the difference between your buying and selling cost that is used to cover expenses such as insurance charges and storage expenses.

Not advisable

Prasunjit Mukherjee, mutual fund expert, and chief ideator, Plexus Management Services says that one should never buy jewelry if the intention is to invest in gold.

The reasons are quite a few.

“If you buy jewelry you would be paying for the design and making charges and you would not get the price when you want to sell it. So that is value lost. Two, storing it at home is hazardous and you might have to hire a bank locker for it for which you have to pay hiring charges. Three, whenever you want to sell it, the buyer, usually a jeweler, will judge its purity and bargain with you,” says Mukherjee.

If you love the lustre of gold and feel an urge to have to buy gold in physical form, buying coins or bars is advisable since these can be purchased from banks and comes with quality certificates.