Mutual Fund

Investment Option: Gold & Best way to buy it

“All that glitters is not gold, but don’t ever forget Gold always glitters.” – Ramji Porwal

As the risk taking abilities and knowledge about financial instruments and stocks is increasing among investors they increasingly started investing in them. But still the preference to buy gold as investment option has not changed and should not change. If we consider the returns of different investment options in general individuals have are the shares for equity oriented instruments and Bank deposits for fixed return instruments.

In last five years, return on Gold has outperformed the returns on NIFTY and FDs buy huge margin. Traditionally, it is a popular avenue of investment for Indians. However, buying jewelry is not as good an investment as buying pure 24 karat gold. Hence, when we talk of gold as an investment, we mean gold coins, gold biscuits or gold bars – any piece of 24 karat gold. But apart from purity there are many other parameters which we should consider while buying gold as an investment option like

  • Purity
  • Ease to buy
  • Ease to sell
  • Security to store
  • Denomination
  • Wealth Tax
  • Pricing Transparency

If we try to evaluate different routes to invest in Gold as done in the following table, we can see Gold ETFs and commodities exchanges are the best way to invest in Gold

Hence, if you are purchasing gold solely for investment purposes, you don’t really need to buy gold in its physical form. You can buy gold in demat form – gold exchange traded funds. A unit of an ETF fund approximates the value of 1 gram of gold. So, modest purchasers can also get into the gold market. ETFs can save you the cost of storage of gold coins and the time and effort to secure your purchase (such as bank locker charges). Just one hitch – if you are buying gold coins for investment such that they can be converted to jewelry later on for any occasion like your child’s wedding – then this option does not work for you.

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