Physical gold vs Gold ETFs vs SGB: Your investment options for Akshaya Tritiya (2024)

1) Physical gold

Physical gold is the most popular way of owning gold, either in the form of jewelry or gold coins.

2) Digital gold

Digital gold is a mode of investing in physical gold. It is just like the regular gold, can be bought online, and is stored in insured vaults by the seller on behalf of the customer. You can buy or sell 24-karat Hallmark gold for as low as ₹1.

"Digital gold is available in India from MMTC-PAMP, Augmont, and SafeGold. Additionally, you can buy it from online retailers including brokerage firms, financial institutions, and mobile e-wallets. Digital gold is 100% pure, stored safely, and fully guaranteed, and the return on this investment is determined by the market price of physical gold," said Vinit Khandare, CEO and Founder, MyFundBazaar.

3) Gold ETFs

Gold ETFs are mutual funds that follow changes in domestic gold prices. The fund management company buys gold bullion using your investment. Due to their listing and trading on stock exchanges, gold ETFs are safe investments that are governed by tight regulations. The required minimum investment is one unit of the gold ETF, which is equal to the price of one gram of genuine gold. Since they are listed, gold ETFs are easy to trade on the stock market and have excellent liquidity.

"This Akshaya Tritiya, consider investing in the yellow metal through Gold ETF. An investor can start investing with an amount as low as ₹53 (one unit of ICICI Prudential Gold ETF). Investing in Gold ETFs will not only bring diversification to your portfolio but also offer easy liquidity, an aspect which physical gold does not offer," said Chintan Haria, Head - of Investment Strategy, ICICI Prudential AMC.

Advantages of investing in Gold ETF

-Convenience to buy and sell gold ETF units like an equity share through a trading account

-It is safe from theft as it is stored in a Demat account

-One need not worry about the purity aspect as the investment is backed by gold bullion of only 99% purity or above.

According to Chintan Haria, overall, investing in Gold ETF has the potential to add shine to your portfolio. An investor can consider allocating up to 10% of the portfolio towards Gold ETFs."

Gold mutual funds

Gold mutual funds are commodity mutual funds that invest directly or indirectly in gold. Investors can invest in gold through exchange-traded funds (ETFs).

Vinit Khandare said that Gold Mutual Funds, which do not invest directly in physical gold, use gold ETFs as a middleman. Due to the fact that the underlying asset is stored in the form of actual gold, changes in the price of gold have an immediate impact on its worth. This functions just like any other mutual fund.

Sovereign gold bonds

Sovereign Gold Bonds (SGBs) are the perfect alternative to investment in physical gold. With these bonds, you can enjoy capital appreciation and also earn interest every year.

"The cost and risk of storage are avoided by sovereign gold bonds, making them a more secure option than actual gold. The RBI issued these securities on behalf of the government; their value is based on the weight of gold. 2.5% annual guaranteed interest rates are provided by SGB," said Vinit Khandare.

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Published: 22 Apr 2023, 06:30 AM IST