Akhaya Tritiya 2024: Here's all about investing in online gold, the new way of buying gold
Representational image/ File Pic
- Digital gold is 24 karat and comes with 99.99 per cent purity
- Gold investment should make upto 5-10 per cent of your investing portfolio
- Gold based MFs, Gold based ETFs and SGB are three modes of investing in E-gold
Gold stands as a generational asset, symbolising prosperity and serving as a reliable investment passed down through time. It's a contingency fund and an excellent means of portfolio diversification. However, is physical gold the exclusive route to profit?
Celebrating Akshaya Tritiya, Midday featured insights from Kalpesh Ashar, a SEBI registered financial expert, shedding light on digital gold. This modern investment avenue offers distinct advantages over physical gold.
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What is digital gold?
Digital gold currency represents electronic money backed by mass units of gold, typically 24 karats with 99.99 per cent purity. Transactions involving this financial instrument are entirely digital. According to Ashar, ideally, 5 per cent to 10 per cent of your investment portfolio should be allocated to gold, with the remainder dedicated to equity investments.
Physical gold Vs. digital gold
Contrary to popular belief, physical gold may not always be the most advantageous investment choice. Ashar emphasised several common issues associated with physical gold, including challenges in storage, concerns about theft, additional expenses such as making charges and locker fees, as well as authenticity issues. Moreover, the emotional attachment to gold jewellery often deters investors from selling it when needed, thereby preventing them from fully capitalising on their investment.
This is where digital gold, or E-gold, shines, as it eliminates such barriers. Unlike physical gold, where making charges are deducted upon sale, investors retain the full value of their asset with digital gold.
Before delving into gold purchases, it's essential to define your purpose—whether for decoration or investment. If your goal leans towards investment, digital gold emerges as the ideal pathway forward.
What are the ways of investing in online gold?
Digital gold can be invested in through three modes.
1. Gold-based mutual funds offer a convenient avenue to invest in a pool of securities, including gold. Similar to other mutual fund investments, they provide great liquidity, allowing investors to redeem their holdings within 24 to 48 hours.
2. Gold-based Exchange-Traded Funds (ETFs) function much like stocks, as they are listed and traded on stock exchanges such as NSE and BSE. Investors can purchase them through a demat account and trade them continuously at market prices. Gold ETFs offer the advantage of buying and selling at real-time market prices, providing flexibility and transparency to investors.
3. Sovereign Gold Bonds (SGBs) are government-issued bonds with an eight-year lock-in period. A significant feature of SGBs is the annual 2.5 per cent interest rate, coupled with the appreciation value of gold, as determined by the RBI. This makes SGBs one of the most lucrative investment instruments. However, the only drawback is the lock-in period.
Gold-based mutual funds and Gold ETFs are recommended for investors seeking short-term investments due to their liquidity and flexibility. On the other hand, Sovereign Gold Bonds (SGBs) are more suitable for investors with a longer time horizon, given their lock-in period.
What is the right time to buy digital gold?
"Buy gold when there is gloom and doom in the world," advised Kalpesh. He emphasised, "When equities are underperforming or uncertainty prevails, that's the opportune moment to invest in gold."
To encapsulate, there's no better time than now to allocate your capital to digital gold. Patience and purpose are crucial for a successful gold investment, particularly for young and risk-taking investors.
For more insights watch the full interview here:
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