The concept of investing in the digital form of a commodity can be helpful to build a diverse investment portfolio. Investing in digital gold involves a method by which an investment in the yellow metal can be made in small payments for a certain tenure, from anywhere and anytime with the convenience of digital access to the commodity.
Forbes Advisor India has put together all the available ways of investing in digital gold. Here’s a list.
Gold Exchange Traded Funds (ETFs)
Exchange traded funds have emerged as a very simple way to invest in gold. Gold ETFs are simply funds that invest in gold and can be bought and sold on stock exchanges, like common stock. Investors are required to purchase a minimum of one unit that is equivalent to one gram of gold to begin trading in gold ETFs.
Some of the popular gold ETFs in India include Axis Gold ETF, Birla Sun Life ETF, HDFC Gold Exchange Traded Fund, UTI Gold Exchange Traded Fund, Reliance Gold Exchange Traded Fund and Invesco Gold Exchange Traded Fund among others.
Starting a systematic investment plan (SIP) is also a planned way to invest in ETFs. Once the investor holds a sizable number of units, conversion to physical gold is also possible.
Gold Mutual Funds
Investors can add gold to their portfolios by purchasing shares in mutual funds. Certain mutual funds base their holdings on stocks of international gold mining companies and other assets exposed to the gold market, like gold ETFs. These mutual funds track the price of gold as the assets they own rise and fall in value.
Invesco India Gold Fund, SBI Gold, Nippon India Gold Savings Fund, DSP World Gold Fund Quantum Gold Savings, IDBI Gold Fund and Kotak Gold count among popular gold mutual funds in India.
These mutual funds charge investors an expense ratio, a charge for managing the fund, as well as a charge of buying the underlying assets. That means you’ll be paying fees to own gold mutual funds.
Gold Futures Contracts
Gold futures are standardized contracts that trade on organized exchanges. In India, Multi Commodity Exchange or the MCX and National Commodity & Derivatives Exchange Limited (NCDEX) are popular exchanges for gold futures trading.
The way a gold futures contract works is that the investor makes a commitment to buy or sell a specific quantity of gold at an agreed price in the future. These gold futures contracts have to be honored by investors by either purchase or sale in anticipation of a profit or loss. In any case, the settlement of the contract happens at an expiry date and the investor is free to buy, sell or hold the contract till expiry.
Gold futures fall in the high-risk category of gold investing and are suitable for mature investors.
Sovereign Gold Bonds (SGBs)
The Government of India offers sovereign gold bonds via the Reserve Bank of India. These bonds, which launched in 2015, aren’t the most popular among Indian masses yet. Though they are considered lucrative given their sustained return on investment.
A sovereign gold bond gives you two advantages: price appreciation plus a 2.5% yield.
Steps To Invest In Gold Digitally
To invest in SGBs and Gold ETFs:
- Open a Demat account that is linked to your Permanent Account Number (PAN) card and bank account.
- For a Demat account, investors need to have complete and verified know-your-customer (KYC) documents. The investors usually need to submit a PAN card or Aadhaar card details and this can be done via e-KYC and video KYC that makes the process fast and easy.
- Investors can invest in select gold products directly from the stock exchanges through mutual funds for Gold ETFs or through RBI’s SGB series to invest in SGB.
- Investment in digital gold can be redeemed at the time of maturity or sell them on the stock exchanges market.
- Investors can invest from INR 1 to purchase digital gold.
Advantages And Disadvantages Of Investing In Digital Gold
What Makes Investing in Digital Gold Attractive?
When you invest in digital gold from authorized dealers, you take ownership of 99.9% 24K pure gold, which is the highest form of pure metal. Digital gold is sold by vendors who have partnered with fintech companies, banks and brokerage houses to enable digital gold purchases.
- The purity of the gold is not a concern anymore when investing in digital gold like the old traditional method of purchasing physical gold.
- The security is top and theft-free as it is stored in a Demat account and can’t be tradable by any other than the investor.
- Investing in SGBs is a passive form of income in the form of interest.
- Investing in digital gold is free of any making charges.
- The advanced growth in technology has made the information of digital investments reach every household. People are aware of investments in digital gold and know the difference between purchasing gold jewelry or ornaments and digital gold investment.
- The lower rates on fixed deposits have turned people into investing in better and safer investment methods i.e. digital gold.
Bottom Line
Digital gold is easy to trade and can be converted into physical gold. Investors are required to pay transactional fees and sale and storage charges for every gold unit. They also need to have account activity every half-early. Today, every service provider for digital gold investment carries a solid credibility but it is important to make an effort and search your service provider’s background and check reviews before you invest.
