In this article
Ways to Invest in Gold
The people of India has invested in gold jewellery for a very long time. The popularity of gold has survived generations.
In the Indian culture, it is customary to gift gold jewellery to newlyweds.
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Even people who do not care much about the aesthetic appeal of jewellery and want to just invest opt to buy jewellery. This is so largely because they do not know any other way to invest in gold.
Buying gold jewellery only for the purpose of investing is a bad idea.
To begin with, gold used for jewellery isn’t the purest. Pure gold is less dense than the alloyed gold used to make jewellery. 22K gold or 91.67% gold is used for the making of jewellery.
Additionally, whenever gold jewellery is made, the jeweller charges between 10% and 20% as making charges.
The same jeweller will buy the gold back from you too. However, the making charge won’t be considered. So right from the very day of purchase, you lose out around 10%. To add to that, 3% GST is applicable on the sale of Gold too.
#2. Gold Coins or Gold Bars
Gold coins or gold bars are a better alternative to gold jewellery when viewed from an investment perspective.
To start off, there is no making charge on gold coins or bars. There might be a handling charge but that is about it. Tax is still applicable.
Gold coins and bars can be bought from banks. They come in tamper-proof sealed packs that guarantee their purity. Usually, 24K gold is used. This means that the gold is almost pure at 99.95%.
While banks can sell you these gold coins and bars, they cannot buy it from you. Jewellers, on the other hand, can do both. There many recognised resellers and recyclers too where you can go to sell your gold coins and bars.
#3. Gold Exchange Traded Funds (ETF)
Gold ETF is a type of mutual fund that invests in gold. Gold ETF are listed on the stock exchange. To invest in gold ETF, you need to have a demat account and trading account.
There is a brokerage fee to be paid here that can be between 0.25% and 0.5%. Further, there is an annual charge that can range between 0.5% and 1% which is the fund management charge.
IDBI Gold Exchange Traded Fund is an example of a gold ETF.
#4. Gold Mutual Fund
Gold mutual funds are funds that invest in Gold ETF. Investing in gold mutual funds is exactly like investing in any mutual fund. You do need to have a demat account to invest in gold mutual funds. Further, you can even start an SIP in a gold mutual fund.
Keep in Mind
Gold vs Stock Market Relation
Gold prices usually are the reverse of the condition of the stock markets. Gold prices had surged during the 2008 recession. In the years since, when the markets are recovering, gold prices haven’t gained much at all.
Gold has been a good hedge against inflation over a long period. While in the short term, you might not observe this, in the long term, gold usually matches the inflation rate.
So it makes sense to invest some amount in gold but not too much.
It is generally agreed upon that about 5-10% of your investment should be in gold. More than that is deemed unnecessary.
To know of better investment options, you should check out equity mutual funds.
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