Best Ways To Invest In Gold Today

Gold is one of the most liquid financial investments that can be sold across any counter. It is a no-frills investment. About 65% of the Indian population in rural areas prefer gold as an investment as availability is much easier rather than investing through banks or other financial institutions. Also, ~80% of gold demand in India comes from Indian weddings. Gold is not only a store of value but also carries a huge emotional quotient with itself. It is very common to see parents gift gold to their daughters/ daughters-in-law during their weddings. It is because they anticipate using gold as a security in case of any distressing times.

However, unlike in old times, there are numerous other ways of investing in gold today. You can invest in gold digitally through Sovereign gold bonds, ETFs, commodity exchanges, etc. You can also invest in gold mining stocks. Each instrument has its own pros and cons. Let us start with SGBs which is also my preferred way of investing in gold.

1) Sovereign Gold Bond (SGB) – was introduced in India in 2015. It not only has low transaction costs but also gives a 2-2.5% interest per annum paid semi-annually. It is also highly safe as it is issued by the government of India periodically. It also does not attract any capital gain tax if held till maturity of 8 years. Investors can, however, exercise their exit option after five years. You can easily buy them through online banking (like HDFC Bank) or through exchanges though it is not very liquid.

2) The second most preferred way of investing in gold is via ETFs eg. Nippon Gold ETF. If you choose this option, you will be able to own shares in different gold-related assets. The one big advantage of ETFs is that it is very liquid, you can easily buy or sell them through exchanges.

3) Now many people of yesteryears do not believe in digital assets and still prefer the physical way. In case of extreme circumstances, physical gold is always good. However, transaction costs are very high around ~5% in such cases. Also, you have to pay taxes on profits. India continues to import huge quantities of gold to date because of ‘The Golden habit in Indians’. For these people, physical gold can be bought in the form of coins, bullion, etc. These are available in different fractional sizes like 1 gram, 2 gram, 10 gram, 20 gram, etc. You can also buy online or from reputed vendors like Titan who provide a certificate for authenticity as well as quantity.

4) Gold jewelry is both an investment as well as carries a consumption value. However, transaction and making charges are high. I suggest buying plain gold ornaments like a band, chains, bangles, etc. to lower making charges and increase gold content for investment purposes.

5) Another less-known way to invest in gold is through gold mining stocks. However, you need a brokerage account for the same, and that too in the U.S. as India does not have any major listed gold-mining stock. Gold mining stocks are leveraged to gold prices. Also, you require specialized knowledge and expertise as you should be well-versed in the fundamentals/ valuation of these stocks. This route may be appropriate for HNI investors.