For Indians, gold is more than a hedge or an investment choice. For us, it is a significant piece of our culture and conventions. On festivals and special events, for example, Diwali, Akshaya Tritiya, weddings, etc. we love to purchase gold, for the most part as jewelry. However, purchasing gold isn’t as convenient as it is believed to be. It includes a few disadvantages:
- Right off the bat, purchasing gold is quite expensive. The credit for this goes to its characteristic qualities and limited accessibility.
- Secondly, for security reasons, it needs to be stored in vaults, bank lockers, which again includes hefty charges. Hence, making it hard for everyone to purchase and store gold.
- Thirdly, not all dealers will purchase your gold. Some dealers will repurchase just the gold that they have sold themselves. Dealers who will purchase others’ gold will most likely trade it at a lower price. Hence, making it an unprofitable recommendation.
Notwithstanding the above mentioned focuses, there are immaculateness concerns, high making charges and extra charges for precious stones and other metals that buyers in India have to bear when buying physical gold.
Presently consider the possibility that we said that there is an approach to overcome the entirety of the above disadvantages. Imagine a scenario in which everyone could purchase, sell and store gold as per their convenience. A few years back it was impractical however now it is.
What is Digital Gold?
Digital Gold is a simple, convenient and secure approach to invest in 24K physical gold online. In this, investors can purchase, sell and accumulate pure gold in divisions anytime and anywhere. Each gram purchased by an investor is backed by a real physical gold, which can be easily sold back online at market-linked gold rate. There will be no storage hassles and no underlying storage charges.
Why invest in Digital Gold?
Reasons to invest in Digital Gold are:
- Pay just for 24 karat gold: When you purchase gold jewelry, you not just pay for the gold you have purchased yet additionally for other amalgamated precious metals and studded stones and gems. In any case, in case of digital gold, every rupee that you invest is used to purchase gold that too of 24K 99.5% virtue.
- Bear zero creation charges: The last expense of gold jewelry includes gold rates as well as making charges, which for the most part varies from 6% to 14% of the price of gold. Then again, the price of Digital Gold is exclusive of making charges, which implies that you bear just the expense of gold.
- No storage hassles: Physical gold needs to be stored in bank vaults, which comes with long haul expensive storage costs as registration fees, yearly charges, service charges, etc. However, Digital Gold saves you from such hassles as it stores your accumulated gold in safe and secured vaults without sans introductory storage costs.
- Trade as per your convenience: Buying physical gold is time-devouring and inconvenient with respect to this you need to visit a jeweler or bank. With Digital Gold, you can purchase and sell gold online anytime and anywhere as per your solace. In this way, sparing your traveling time just as your efforts.
- Convert ‘Gold’ into ‘Money’ in a split second: You can easily sell Digital Gold online anytime and anywhere. After you sell the desired gold sum successfully, the sum will be transferred to your registered bank account in only a few hours. Be that as it may, to liquidate physical gold, you should visit the seller during its working hours and afterward sell to get money.
How does Digital Gold work?
The measure of gold you purchase will be backed by certified 24k (995 fine) physical gold. The gold purchased will be insured and kept safely with a reputed Custodian on a consolidated premise. Simply after the gold purchased has been tested on different parameters, for example, weight and virtue, it is accepted in the vault. On the off chance that you sell a certain measure of gold from your account, the same measure of physical gold will be removed from your vault.
Investments in Gold have been mainstream since a very significant time-frame. Besides physical gold and E-Gold, Gold Mutual Funds are introduced as a medium through which an investor can invest in gold as an asset class and not hold it in the tangible form.
What are Gold Mutual Funds?
Gold Mutual Fund is an open-ended scheme which invests the assets in gold-delivering companies or in gold bullions and units of a Gold Exchange Traded Fund (ETF). Gold is one of the most significant asset classes because of its capacity to develop with expansion and counter to economic crises. It goes about as a protection for investment portfolios against instability.
Let us find out about the best gold common funds available in the market, who ought to invest in gold funds and what are the benefits which can be expected with investments in such schemes.
Difference between Gold ETF and Gold Mutual Funds
Often confused with each other, Gold Mutual Funds and Gold ETFs are two different approaches to invest in Gold. Here are some focuses which can help you recognize the two:
- Understanding the meaning:
Gold Mutual Funds are shared funds/schemes which invest in gold-delivering or gold-mining companies and gold exchange-traded funds (ETFs).
However, Gold ETFs are funds that invest a base 90% of the assets into physical gold of 99.5% immaculateness and 0 to 10% in debt instruments.
- Price of Gold MF and Gold ETF:
Gold shared fund units and Gold ETFs are priced differently. You can check the price of gold fund units from the respective Net-Asset Value (NAV) of the fund. Be that as it may, since gold ETFs are listed on the stock exchange, you can check and seek real-time updates about their respective prices.
- Liquidity
Gold ETFs are listed on stock exchange; hence, can be purchased or sold anytime during market hours. In addition, one can convert them into physical gold provided they have 1 Kg of gold in their account or breaking point set by your fund house. Then again, you can redeem the units of gold common funds by selling them back to the fund house on the NAV of the day. Gold Mutual Funds additionally charge an exit load which is otherwise not applicable in case of Gold ETFs. Hence, Gold ETFs are more fluid than gold funds.
- Costs Involved:
No exit load is applicable in case of Gold ETFs however Gold Mutual Funds may charge an exit load while redemption of the units within the lock-in period. Moreover, the expense proportion for Gold Mutual funds is higher than that of Gold ETFs.
- Demat Account:
You can purchase units of gold ETFs from the stock exchange simply after you have opened your demat account. Units of Gold common funds can be purchased from the respective fund houses without the requirement of a demat account.
Things to be considered before investing
Here are some very significant elements which must be considered before beginning investments in Gold common funds:
- Hazard Involved: Any investment will involve some measure of hazard. Gold Mutual Funds are moderately hazardous investment alternatives. In India, the performance of gold as an asset class has fluctuated since 2008, just until a year ago it gave better returns than equity. Investments in gold common funds are backed by real time gold prices which are further influenced by current market scenarios. Hence, these shared fund schemes could possibly give favorable returns at some purpose of time.
- Returns: As far as the performance is concerned, Gold is observed to have seasonal responses. It gives higher returns during market instabilities and expansion. This is because during bearish market conditions, investors tend to seek a safe shed for their funds and thereby invest in gold. It is treated more like a safe alternative than a genuine investment opportunity.
- Taxation: Gold Mutual Funds have no tax benefits to offer to its investors. Taxes on long haul capital increases (LTCG) are taxable at 10% whereas momentary capital additions (STCG) are taxable as indicated by the applicable slab rates to investors.
- Diversification: Investors are often suggested to diversify their portfolio into gold so as to spread the overall hazard. However, it may not be an ideal asset for diversification for a wide range of investors. It very well may be of great help for the investors with large-size portfolios and they can place a limited quantity into gold to protect the portfolio against instability without affecting the investment objective. However, for little to medium-sized investors, gold may neglect to provide necessary benefits because of its low-return generating limit.
- Employ a Dynamic Approach: If you will invest in gold shared funds or use it as a diversification device, you should use a unique methodology which does not hurt your investment objective. Fundamentally, investors should powerfully strategize their gold investment for ideal benefits. You ought to invest profoundly in gold just when the market is unstable. When the market regains confidence, you should move your assignments into other asset classes which are better than gold.
Benefits of Investing in Gold Mutual Funds
Here are some of the benefits of investing in Gold Mutual Funds-
- Easy and Convenient access to gold through Gold Mutual Funds without holding it in the physical form
- Gold shared funds protect the portfolio from market unpredictability because of their capacity to go about as a hedge against swelling and market instabilities
- Investments should be possible with a base measure of Rs.1000 (by means of SIP) without the requirement of a demat account
- These funds can be used to acquire diversification the portfolio thereby spreading the overall hazard
Who ought to invest in Gold Mutual Funds?
Investors who will invest in gold as an asset class
Gold common funds are not so much safe for investors. As an asset class, gold has given unfavorable returns over years. Due to frequent vacillations in the gold prices, the funds are placed at moderate market dangers. Hence, investors who will take dangers ought to invest in these common funds
There are no tax benefits associated with gold funds. People who are not seeking investment choices with tax benefits, yet an emergency fund can choose to invest in gold related schemes
How to Invest in these Mutual Funds?
The investment procedure for Gold shared funds is the same as that of some other Mutual Fund. There are different methods through which one can invest in gold funds:
- Offline mode – Visiting the nearest branch office of the fund house and investing in the desired scheme. You should convey all the required documents, for example, Identity Proof, Address Proof, Cancelled Check, Passport size photos, PAN Card and KYC Documents helpful. You can likewise invest offline through a broker. However, this would then be a regular fund and not a direct fund. Think of it like a charge brokerage which gets deducted from the absolute investment sum
- Online Portal – If you need a hassle free mode of investing without any commissions and brokerage, you can choose websites like Paisabazaar.com which permit the investors to compare more than 1,700 funds at one platform instead of visiting the website of each AMC and afterward searching for numerous funds. You can select the fund where you need to invest, take a gander at the details and compare comparative schemes just as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment