In Indian tradition, buying gold during Dhanteras is considered a symbol of luck, prosperity and auspices. This yellow metal has delivered healthy long-term returns and has become an asset that provides financial security in these times of crisis. Gold is considered a hedge against inflation and is inversely correlated with equities. When there is high volatility in the financial markets, gold provides stability to the portfolio. If you are looking to invest in gold, here are some options other than physical gold to invest in these Dhanteras.
Sovereign Gold Bond (SGB)
The Sovereign Gold Bond is issued by Reserve Bank India on behalf of the Government of India. The bonds are denominated in multiples of grams of gold with a basic unit of 1 gram and the minimum investment allowed is 1 gram. Gold sovereign bonds offer an annual interest rate of 2.50% to investors. These bonds have an eight-year maturity term with an exit option after the fifth year. The redemption price is based on the gold price in effect at that time.
Experts say that the sovereign gold bond is an effective way to invest in non-physical gold, if a buyer holds to maturity. Capital gains, if any, at maturity are tax-free. This is an exclusive benefit available on gold bonuses.
The eighth tranche of gold sovereign bonds of this fiscal is open and will close on November 13.
Gold Investment funds
A gold fund is an open-ended mutual fund scheme that invests in units of gold ETFs. This does not require a demat account. An investor can invest and redeem gold funds just like any other mutual fund. Mutual funds also offer international gold funds that invest in units of gold funds abroad. Mutual fund experts believe that international funds are very risky and not suitable for retail investors. Only those who understand international markets can invest in them.
Gold ETF
Gold ETFs or exchange-traded funds are publicly traded and invest in physical gold. Each unit of a gold ETF represents 1/2 gram of physical 24 karat gold. Gold ETFs provide ample liquidity as they can be sold on exchanges at any time. Gold ETFs are traded on the exchange at the prevailing market price of physical gold, so investors can buy or sell units at a price close to the market price, without paying a premium to buy or sell at a discount.
Each and every ETF unit is backed by physical 24 karat gold, held in secure vaults and fully insured.
Gold funds or gold ETFs are often considered more liquid options than sovereign gold bonds.
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