Many Indian households buy gold on Dhanteras and Diwali since buying the yellow metal on these two festivals is considered auspicious. While some want to buy gold jewellery, others look at gold as an investment tool to diversify their portfolio and create wealth over time. Investing in the yellow metal is not limited to buy physical gold as it can be done in many ways. Depending on the budget and investment objective, an investor can choose different forms of gold such as physical gold, gold exchange-traded funds (ETFs), digital gold, electronic gold receipts (EGR), etc.
Here are the 5 ways to invest in gold this Dhanteras and Diwali:
1. Physical Gold: Coins, bars, and jewellery
In many households, people buy jewellery on Dhanteras. But individuals who want to invest in the yellow metal without buying an ornate design might choose gold coins or bars.
Gold jewellery can be worn on special occasions and passed on to the next generations. However, if you are investing in gold jewellery, the price of the jewels will also be included in the overall price. You also pay Goods and Service Tax (GST) on gold and on making charges. . You may not receive the total value of these charges if you wish to sell jewellery in the future. So, if you want to invest in gold as a source of investment, also consider these charges.
2. Gold exchange-traded funds (ETFs) and gold mutual funds
Gold ETFs invest in physical gold bullion and gold-related instruments. These can be bought from the share market with a demat account. They follow the price of high-purity gold and can be bought and sold during trading hours in the share market. .
Alternatively, you could think of investing in gold mutual funds (which invest in gold ETFs). They can be purchased through mutual fund platforms or the fund house. You don’t require a demat account to invest in gold mutual funds.
Both provide investors an opportunity to take exposure to gold prices without holding physical gold. Unlike physical gold, you don’t need a storage place for gold ETFs and gold mutual funds.
3. Digital gold
Digital gold provides exposure to individuals to purchase gold online, generally starting with a small quantity. Customers can utilise payment applications such as Paytm, PhonePe, and Google Pay to acquire digital gold. Gold can be purchased starting at Re 1. Digital gold also tracks the price of pure gold.
The gold is held digitally, and the provider is said to keep an equivalent amount of actual gold.
However, digital gold is not regulated by the Reserve Bank of India (RBI) or the Securities Exchange Board of India (SEBI), so one also needs to assess the risks of holding it.
4. Sovereign Gold Bonds (SGB)
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price, and the bonds are redeemed and paid back to investors on maturity. The gold bond is issued by the RBI on behalf of the Government of India.
You can buy SGB from the secondary market as the RBI has stopped issuing fresh SGBs.
5. EGRs (Electronic Gold Receipts)
Another option of investing in gold without carrying the physical metal is through Electronic Gold Receipts (EGRs).
EGRs are exchange-traded securities linked to standardised gold, enabling market-based price discovery, electronic holding, and the flexibility to buy and sell in defined denominations and purity. You can also convert them to physical gold.
EGRs are traded on official stock exchanges, with regulations and products in place. EGR value is connected to the gold represented in them, and trading price may also be influenced by its demand and supply in the market.
Which is a better option this Dhanteras or Diwali?
This will depend on your purpose of gold investment.
Before deciding one has to think about the total cost, liquidity, taxes, and exit choices. Your short-term profits are not guaranteed wherever you invest; gold prices can go up or down as well.