Gold is typically considered a hedge against inflation and financial uncertainty. This is the reason wealth planner often dedicating about 10 to even 15 per cent of overall investment portfolio to the yellow metal at any given time. Gold has appreciated by about one-third over the past one year, and analysts say it is believed to be in a long-term uptrend.
Here are few ways of investing your money in gold:
Physical Gold
Typically, the onset of festive season leads to increased footfall at gold jewellers. Physical gold, inarguably the oldest and most preferred route to gold investment, can be purchased in the form of jewellery, bars and coins. India is the second largest consumer of the yellow metal, after China.
The price of gold in its physical form includes making charges, which is the cost covering the cost of giving gold shape such as jewellery.
This is why wealth planners prefer purchasing gold in a non-physical form, especially from an investment perspective.
Gold coins and bars are available through any designated outlets of Metals and Minerals Trading Corporation of India (MMTC), and designated branches of banks and post offices.
Non-Physical Gold
Gold Exchange-Traded Funds (ETFs)
Gold exchange-traded funds invest in physical gold, and are traded in the same way as equities on stock exchanges. Investors need to have a demat account and a trading account to deal in gold ETFs, which invest in gold of 99.5 per cent purity.
The majority of your investment goes into physical gold and the remainder into debt Instruments.
Gold Funds
Gold funds invest in the shares of companies operating in gold and allied services. Unlike gold ETFs, gold funds are managed by fund managers, in a similar fashion as mutual funds.
Gold mutual funds are ideal for risk-averse investors as they work on the principle of diversification.
Gold Fund Of Funds
Also known as gold saving funds, these are mutual funds that invest in gold ETFs. Experts consider gold fund of funds for their investor-friendliness, an alternative for those who do not want to deal in gold ETFs. Investors do not require a demat account to be able to invest in gold fund of funds.
Gold Mining Shares
Shares in gold mining companies are available in secondary equity markets. Their prices reflect changes in gold benchmarks.
Sovereign Gold Bonds (SGBs)
Issued by the Reserve Bank of India on behalf of Government of India, these are bonds linked to the current value of the yellow metal. These bonds have a tenure of eight years, with an exit option after the first five years.
If you are planning to purchase sovereign gold bonds this Dhanteras, Friday is the last day to do so. The SGBs will be available for subscription next for five days four times till March after the current tranche.
Gold Derivatives
Gold futures and options derivates contracts are available on Multi Commodity Exchange (MCX). These are just like any other derivatives contracts with the market price of gold as underlying asset.
