How to invest in gold?

Deepika Chelani
Updated: 13 Dec 2021, 05:07 PM IST
TL;DR.

What factors should be considered at the time of investing in gold? We decode this for you

Gold has always been considered a highly liquid asset class and lucrative investment. Investors can easily buy and sell ETF, physical gold, digital gold and mutual funds in the market.

Gold has always been considered a highly liquid asset class and lucrative investment. Investors can easily buy and sell ETF, physical gold, digital gold and mutual funds in the market.

It is critical to invest through a reputable source and only purchase certified gold. Additional fees, transaction costs, expense ratios in the case of ETFs, storage costs, insurance, and so on should all be considered.

The sanctity of gold is unquestionable in India. The auspicious metal has sentimental values attached to it in many other parts of the world as well. Throughout history several wars have been waged for this natural resource, that’s how significant the yellow metal is due to its abstract and utilitarian merits.

Buying gold is the go-to investment of the majority of the Indian population because it has intrinsic value as well. The demand for gold jewelry, coins, and other items is higher around festivals and the wedding season. Buying a commodity is different from investing in gold, let’s learn how to optimally invest in gold.

Determine your motive

Before anything else, you must determine why you wish to invest in gold and try to unravel how you can do that with this particular investment. This decision should be based on your financial goals and can be anything including- earning interest, for backup as security, etc.

Choose the type of gold

After you have determined why you want to invest in gold, this step comes easy. There are myriad options through which one can invest in gold these days. ETF, gold stock, physical gold, sovereign bonds are a few of the items on the list.

This is an important consideration and depends on your motive to buy as well as other factors. The factors for deliberation are- whether you desire to invest in a lump sum or through SIP, for the long term or short term, if you want liquidity, and most importantly you if you want physical possession or on paper, if the former then you have to narrow down further and make decisions based on your storage requirements.

Mode

The last step after narrowing down to the type of gold you wish to invest in is choosing the mode for investment according to your convenience. The wide majority prefers to go down to their local jewelry store and invest in coins or bars. However, in these advanced times, numerous other modes have been developed and you can invest in gold without even leaving your house.

You can choose to buy physical gold online on established websites and get them delivered to your house. Otherwise, if you wish to invest in paperless gold the process is quite simple and similar to investing in equities for instance if you want to invest in sovereign bonds or gold funds you are required to hold a DEMAT and Trading account.

Similarly, if you wish to invest in gold ETFs, the procedure is like investing in mutual funds, you may go down to a fund house or log on to your asset management company’s website and invest through there.

Whatever option you choose, it is paramount to invest through a trusted source and buy only certified gold. You should contemplate additional charges like fees, transaction cost, expense ratio in case of ETFs, storage cost, insurance, etc.

Gold is considered a low-risk investment by many as its value has risen in the long run until now. But in the short run, it is a volatile investment. It is suggested that one makes all the investment decisions only after studying the market conditions and understanding the risks involved.

 

First Published: 13 Dec 2021, 05:07 PM IST
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