Best Ways to Invest in Gold | Sovereign Gold Bond vs ETFs vs Mutual Fund vs Digital & Physical Gold

Gold has been a financial support system over the years. Buying gold in physical form isn’t the only way of investing in it. In this video, ETMONEY Expert, Shankar Nath, examines the various ways in which one can buy gold.

Chapters:
00:00 Introduction
03:07 How to buy gold
05:23 Availability
05:55 Risk
08:43 Minimum Investment
09:57 Returns and Cost
15:22 Liquidity
17:35 Tax
19:26 ETMONEY Opinion
👉HOW WE USE GOLD IN OUR LIVES?
Gold can be divided into two major buckets

1. The Consumption bucket - Gold in the physical form. This includes jewelry, coins, wristwatches.

2. The Investment bucket - is a combination of different financial instruments like digital gold, gold ETFs, gold mutual funds, sovereign gold bonds, etc.

👉WHY and HOW TO BUY GOLD?
Why buy gold?

1. Gold delivers between 8 to 9% over the long term
2. Gold is a useful hedge against inflation and equities

How can one buy gold?
Gold can be bought in a physical format or in an electronic mode.
Physical gold: jewelry, gold coins, gold bars, or bullion.
Electronic format: Digital Gold, Gold Mutual Fund, Gold ETF, and Sovereign Gold Bond

👉AVAILABILITY
Physical gold, digital gold, gold mutual funds, and gold ETFs are available at most times. The only exception to this is the sovereign gold bond which is available periodically.
👉RISK
Physical gold comes with a lot of risks like the risk of theft, loss during the making, etc.
Digital gold isn’t regulated by any agency like RBI or SEBI. Hence the risk is quite high in this as well.
Gold ETFs, Mutual funds, and SGB’s are a far safer option as they are regulated either by SEBI or RBI.

👉MINIMUM INVESTMENT
In this section, we look at the affordability factor or the minimum investment required to buy gold

Physical gold’s lowest denomination is the 1 gram gold coin.
Digital gold can be bought for as low as Rs.1. In gold mutual funds, one can start investing through them for as low as Rs.100.
👉RETURNS AND COSTS
Physical gold has costs like GST, Making & design charges, and Storage charges. All these costs end up eating a portion of the returns. Hence the returns on physical gold are lesser than the other form of gold investments.

Digital gold too attracts a GST of 3% which eats into your returns. In addition to GST, there are many incidental costs like technology costs, hedging costs, insurance, and transportation costs. The digital gold companies manage these costs by using the difference between the gold buy price and the gold sell price. The Buy-sell spread is about 6%. which is pretty heavy.
Gold ETFs have brokerage costs, Demat account expenses, and an expense ratio. All put together, you’re looking at an expense of 0.5% to 1% when it comes to gold ETFs.

Comparatively, gold mutual funds have an expense ratio that is a tad higher than the ETF expense ratio. There is 0.5% to 1% ETF costs plus the gold mutual fund adds an additional 0.1 to 0.2% on top of it.

The sovereign gold bonds have no visible expenses. On the contrary, there is a discount of 50 rupees per gram if you complete the entire process online. In addition to no expenses, there is a fixed interest of 2.5% per annum they offer on your initial investment.
👉LIQUIDITY
Liquidity is not a problem in most products. You can physical and digital gold is sellable at any time and so is the case with your ETFs and gold mutual funds.

Sovereign gold bonds where there are some conditions and peculiarities that come in.

Sovereign gold bonds come with a maturity of 8 years. If you want to redeem these bonds earlier then you have two options

1. You can demat these bonds and offer them in the secondary market after 6 months of issue.

2. You can pre-maturely encash your bonds after 5 years without having to go through the secondary market.
👉TAX
Tax on capital gains is applied on the sale of physical gold, digital gold, gold ETFs and gold mutual funds.
If the gold is sold within three years and at a profit, it shall be considered as short term capital gain. This means the gains will be added to your income and will be taxed as per your applicable income tax slab.

If the gold is sold after three years and at a profit, then it shall be labeled as long term capital gain. Your long term capital gains will be taxed at 20% with indexation benefits.

In the case of the sovereign gold bonds.

All interest received on account of the gold bonds are added to your income and are taxed per your prevailing income tax slab.
If sovereign gold bonds are redeemed at the end of 8 years - which is the tenure of these bonds - all capital gains are entirely tax-free.
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Видео Best Ways to Invest in Gold | Sovereign Gold Bond vs ETFs vs Mutual Fund vs Digital & Physical Gold канала ETMONEY