Gold, keeping aside its historical value, has been able to churn an impressive average annual return of 9.6% consistently over the last four decades, as per a 2021 report by ET Money. As a result, many might consider gold as one of the safest and least volatile investment optionsavailable for investors over a long period. Moreover, given its usual inverse relationship with the stock market’s performance, most people use it as a hedge in their portfolio.
What is the best way to invest in gold?
Traditionally, we have seen gold being bought in physical form only. But in the last few years, we have seen the rise of several fintech companies and other options that has allowed buyers to acquire gold without taking its physical possession. But physical gold has not lost much of its sheen and continues to enjoy an important place in Indian households.
Here are the best ways to invest in gold –
- Physical gold
If you want to invest in gold and are comfortable holding it in its physical form, you can buy gold jewellery and gold coins. Several retailers sell it, but there are several disadvantages. First, there are additional charges involved, especially in the form of jewellery making charges, which may impact the overall return you earn. Also, it can be challenging to keep it away from prying eyes.
- Gold ETFs
Gold Exchange Traded Funds (ETFs) are among the best ways to invest in goldin digital form. Every unit of an ETF represents ½ gram or 1 gram of 24 karats physical gold. Because these are traded on the stock exchange, they are liquid, and you can hold or sell them without paying any premium.
- Sovereign Gold Bond (SGB)
SGBs are government securities issued by the Reserve Bank of India on its behalf. Through SGBs, you can buy a minimum of one gram of gold and a maximum of 4 kg in a fiscal year. These come with eight years of lock-in, and partial redemption is allowed after the fifth year. These are unique as they also entail the investors to an interest of 2.5% per annum and the increase in gold value for the period held.
- Digital gold
Digital gold is another viable alternative to holding physical gold. In this case, you can invest with an eligible gold trader for as low as Re. 1. It is a highly liquid form of investment, and you can either get the investment value or the delivery of physical gold (subject to the retailer’s terms and conditions).
- Gold saving schemes
Many jewellery retailers have a gold savings scheme wherein customers can deposit a specific sum periodically (usually monthly). Then, on maturity, customers are eligible to receive the invested amount and additional bonus (if any) from the jeweller and use it to buy any gold ornament from them.
Apart from these, opting for gold mutual funds is also one of the best ways to invest in gold. Gold mutual funds are basically a type of mutual funds that invest in the precious metal, through Exchange Traded Funds. This can be a good option for those looking to invest without the necessity of a demat account. You can invest in any of the given options that suit your goals and reap benefits.