how to invest in gold - 6 ways explained !

8/6/2015 HowtoInvestinGold6waysexplained!

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How to Invest in Gold 6 ways explained ! MANISH CHAUHAN 100 COMMENTS

Gold recently crossed its Rs 30,000 per 10 gm mark . This is a historic moment and I am sure a lot of peoplewant to get into gold investments for their own set of reasons. But how to invest in gold, given there are somany ways of gold investing these days, most of the people are stuck with so much of choices . More than theprice , the bigger deterrent the confusion of best option to invest in gold.

6 ways to invest in gold

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In this article we will see how to invest in gold in different ways and what are the pros and cons of all theoptions. The main focus of this article is to make the options more clear to you and help you take decisions.

1. Physical goldThe oldest and most widely used way to invest in gold is in the form of physical gold. I would say this is formwith which most of the people are comfortable with . From centuries, physical gold is the only way to investin gold . Now coming to the point , there are two ways to invest in physical gold

a) Jewellery This is the most famous way of investing in physical gold. This is mostly done forconsumption rather than investment . Obviously jewellery is also an investment product in itself , butmost of the people buy it for consumption purpose. The best part of Jewellery is that its very easy toinvest in it , all you need to do is cash or cheque and thats all , you can buy it . Also the whole family ismore comfortable with this option. However the sad part is that you do not just pay the market price ofgold , but also making charges for jewellery . As its in physical form , there are chances of theft also . Onemore problem with jewellery is that there are chances of fraud at times , you can be sold a inferior qualityof gold in the name of high quality gold. So its very important from where you buy it.

When should you buy ?

Its advisable that if there is some marriage going tobe there in your house in near future, you can investin physical gold . Also note that you are very clearthat it will not be required for emergency in shortterm. It might also be a possibility that you are moreattached to physical things and do not believe inonline option , thats another reason you can go forit.

b) Gold Bar/Coin

Gold Bar and Coins are another good way to investin physical form of gold. Gold bar/coins are sold by

all the banks and jewelers . Its a good way to invest in gold if you want to do it for pure investmentpurpose or for some distant future marriage like your sister or daughter marriage. The good point aboutbars/coins is that depending on the requirement you can either buy more (bars) or less (coins) and easilyavailable at Banks and jewellery shops , but banks only sell it , do not buy it back. Also generally there isno consumption done on regular basis so a person can keep it in locker or some safe place for long time.The bad part of gold bar/coins are that its always available at a premium price of 5-10% and at the timeof selling them , you again will get a discounted price of 5-10% , so overall your returns will go down .


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You can buy a gold bar/coin if you are too attached to physical gold and can not go for online option. You can buy it for investment purpose also , but note that returns would be compromised becauseof the discounted price you get at the time of selling and at the time of buying . In case you havesome marriage at home in coming future (not very near) , then also you can buy it .

2. Gold ETFGold ETFs are just like stocks , you can invest in these if you have a demat account . An ETF a online versionof physical gold . The best of gold etf is that its convenient to invest in Gold ETF if you already have a demataccount and can start with a small amount (1 gm value) and as and when you want you can invest from timeto time. However the sad part is that you have to pay the brokerage and you do not get a feel of gold in yourhands which you get with physical gold . The gold ETF can also be illiquid at times if you have not chosen theright one . Also there are high chances that you will sell your gold ETF in the time of small emergencies whichyou will not do with physical gold. Gold BeeS from Benchmark and Kotak Gold ETF are one of the biggestgold ETFs in India right now and they are highly liquid. We recommend Gold ETFs to our Financial Planningclients as their expectation is liquidity + some exposure to gold for investment point.


You should buy gold ETF if you already have a demat account and would like to invest from pureinvestment perspective , You can consider them as liquid as you can sell them on any day in the stockmarket .

3. Gold Fund of FundsGold Mutual funds are those mutual funds which invest in another parent mutual fund which nally investsin stocks of gold mining companies and companies which are related to gold related activities . They also buyphysical gold , but in very small quantities . This is not the suitable investment for those who want to trackgold prices , because these funds do not invest most of their money in gold , but gold related companies . Soits mainly a equity fund which invests in companies. For example AIG World Gold Fund , which does nothingbut invests in its parent mutual fund AIG PB Equity Fund Gold, which nally invests in different companies .The good part of these funds is that if you are optimistic about the future of those companies involved ingold, these are good funds , but the sad part is that you will pay expense ratio two times because it is fund offunds. A lot of people invest in these funds by mistake thinking that they invest in real gold.


By now you will be very clear that these are actually like a sectoral fund which invests in only thosecompanies which have their work in gold related things like mining gold etc. So its extremely risky orrewarding . So if your criteria is to invest in gold companies and not gold , these are the funds to invest in

4. Gold Saving Funds



These are the mutual funds which invests in real gold . They pool in money from people and buy gold and youcan buy the units of these mutual funds . The best part of these funds is that you can systematically invest ingold per month through SIP route . The best part of this is that you dont need to have a demat account toinvest in gold saving funds . You also can invest regularly in gold through SIP through this funds. But the sadpart is that you pay administrative charges and expense ratio just like any other mutual funds.


This is really a great way to invest in Gold if you do not have a demat account and would like to regularlyinvest on monthly basis . This is highly liquid option also because you can anytime sell the gold fundunits like any other mutual funds unit .

5. e-Golde-Gold was launched some time back in India from the exchange called NSEL , which also has othercommodities like Silver and Platinum in e-format . Its very much like Gold ETF , where you can invest in Goldin online format . For investing in E-Gold you still need a demat account, but with one of the companiesauthorised by NSEL (list here) . The best part of this option is that you can also take physical delivery of goldwith some terms and conditions. But the sad part is that not all big broking houses demat account can beused to buy this, you need to open another demat account for this and this option is not too much popularwith retail investors .

When should you buy it ?

You can buy this if you need physical delivery of gold at some future point of view , but you also want tobenet from the online advantages like the market price and no storage cost at your side. Read moreabout this in detail here

6. Gold FuturesOne more option to invest Gold is through Gold Futures, but I would like to call it more of a trading activityand not investment because its short term in nature. You can use Gold Future to protect the pricing . If theprice of gold today is Rs 30,000 and a 3 month gold future price is 30,500 , then you can lock the price at thismoment to 30,500 , so that when you want to buy the gold after 3 months, you get it at 30,500 only . Thiswould require a little bit of knowledge on how futures work .


This option is bit more technical and one should only use it if you have decent amount of knowledge . Dothis if you want to lock the price of gold which you want to buy in future, if you fear that prices can govery high .

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Which option are you going to choose and why ? Are you now clear on how to invest in gold as per yourcondition ?

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MOHIT

May 19, 2015 at 12:10 am

Hi,I want to invest in physical gold on every month basis and I can invest every monthRs.2000-2500. So please suggest me, what can I do and from where I can purchase goldwith 999.0% purity.Regards,Mohit

Reply

Manish Chauhan

May 29, 2015 at 1:47 pm

Hi Mohit

You can purchase it from jewellers only . There is something call Vedni (inmaharasthra) which is just raw gold ..

Reply

Prafull

April 19, 2013 at 2:50 pm

Hi Manish,Thanks for all the excellent work you are putting up.I wanted to know about such a gold investment in which I am free of wealth tax andmost importantly in which I can get income tax benets, say, that I can get redemptionin income tax?? Can u give me such a link in which, how that investment works, isexplained.

Reply

Manish Chauhan

April 26, 2013 at 2:41 pm

there is no such gold related investments

Reply



BV Anil

January 9, 2013 at 11:27 pm

Im a govt employee and I get subscribe around 1lac every year in PF which has aninterst of around 8%.Im planning to invest a lumpsome amount of around 1lac in gold fund and also.. startany monthly investiment plan in gold.I dont have a demat.I heard bullionindia.in and Reliance gold plan are newly introduced.I dont need physical gold but am looking for good returns.

Reply

BV Anil

January 9, 2013 at 11:16 pm

Hi Mr. Manish,I earn around 4lac/annum. I PF subscribtion is around 1lakh per annum at an interest of8%.Honeslty, Im looking forward for an entity which gives good returns.So do you think gold fund is a good option for me?Could you please let me know if Reliance gold plan is good or if bullionindia.in or couldyou please tell me which is the best wherein I can get the amount in liquid form whenever I need?I dont have a demat account. And moreover Id like to go for a one time investiment planor almost 1 lakh for one year- two years.

Reply



Anurag

November 9, 2012 at 12:15 pm

Hi Manish ,

I need physical gold after 4-5 years .What option should I choose to average the Goldprices in a systematic way .Should it be gold etf or e-gold ?

Reply

Manish Chauhan

November 12, 2012 at 8:20 am

Truely speaking , you can go for anything, does not matter much at the end ofthe day , but if you already have a demat account, you can go for gold ETF

Reply



Mandeep


Hi Munish, Plz tell me about GOLD GINNI.

can we buy GINNI in physical form, may be it is best than jewellery.

Regards,

Mandeep

Reply

Manish Chauhan


yes, you can buy it , what exacty you want to know on that ?

Reply

Mandeep


Hi

may be i heard about GINNI that its price is as per market rate, likewhen we sell gold jewellery the amount deducted from 5-10% ormore may be, but in GINNI case, which is current price, we can sellthe same on that price is this correct?

may be you can understand, what i want to know.

regards,

mandeep

Reply

Manish Chauhan


I have no idea on this GINNI thing !

Reply



Mandeep


Hi Munish,I read the Article, there are many options to invest in GOLD. As per my requirements, iam investing in Reliance Gold Saving Fund (G), which i think, is best for me and it is alsogiving me a good return.

As per my views, SIP option is best,

Regards,

Mandeep

Reply

Manish Chauhan


Thanks for your views !

Reply



Swagata Guha

October 29, 2012 at 10:04 am

Hi Manish,I invest in gold through benchmark gold etf. I m very fond of investing in silver too. Butnot in physical form. I came acroos an article in business standard on investing online ingold and silver at wholesale price through bullion India platform (article was given on22nd October)

http://www.business-standard.com/india/news/now-invest-online-in-gold-silver-at-

wholesale-prices/192427/on

Bullion India provides the convenience of buying as low as 0.1 gm of gold and 1 gm ofsilver at live wholesale prices. Along with the price benet Bullion India avails facilitieslike no storage fee, free insurance, no account opening charges and no brokerage. Thesefully insured bars are home delivered at a nominal cost.

Is investing in this way safe and reliable??? Can you guide me regarding this article? CanI go for this?? Pls suggest.

Reply

Manish Chauhan

October 30, 2012 at 10:50 am

I am not aware about it , so cant comment, can you open a thread to discuss

about it at our forum http://www.jagoinvestor.com/forum

Reply



Suchi

October 27, 2012 at 9:09 pm

Hi Manish,

Can you please tell me the difference between e-gold and gold etf ?

I can invest 1-2,000 per month in this and I dont mind buying anyother metal also, if it isprotable. Also, I dont require it in physical form.

Please suggest which one is better.

Do I need to open trading and demat account both for investing in either of the two?

Please let me know in terms of service and brokerage, from whom I should get mydemat account openned?

Sorry for so many questions, this will be my rst investment

Thanks,Suchi

Reply

Manish Chauhan

October 30, 2012 at 11:22 am

e-Gold is traded at different stock exchange , Gold etf is traded at stockmakrets ,here is the difference

http://www.jagoinvestor.com/2010/09/invest-in-gold-and-silver-through-e-

gold-and-e-silver.html

Reply



Suchi


Hi Manish,

I think I have found the right person who can answer my questions.

I want to invest in gold monthly(1,000-2,000 per month). Do not require it in physicalform, just need prot

By now, I think Gold ETF and e-gold are most attractive but m not very clear about thedifference between the two.

Also, do I need to open trading account and demat account both for investing in any ofthe two?

In future I dont mind investing in any other metal too. I think, I can avail this facility incase of e-gold but m not very sure about gold etf.

Please let me know which one can be the best option for me and from whom I shouldget my demat account openned?

Thanks

Reply

Manish Chauhan

October 30, 2012 at 11:22 am

See this http://www.jagoinvestor.com/2010/09/invest-in-gold-and-silver-

through-e-gold-and-e-silver.html

Reply

Sravi


Hi Manish ,

Thanks for the wonderful article again. I want to invest in gold (not in physical form) formy kids marriage and now she is 2 years old. please help me in which form ofinvestment is good for me in long term considering all the charges.

1. Shall i get demat account and invest in gold etf ?or2. Shal li invest in gold saving funds through SIP.?



2. Shal li invest in gold saving funds through SIP.?or3. Shall i go for e-gold?

Please throw some light on it.

Thanks,Sravi

Reply

Manish Chauhan


You can start with gold saving fund through SIP , it will be like buying mutualfund only !

Reply

sravi


Hi Manish,

But, gold fund eats most of our returns by charges and gives lessreturns. wat say?Further research seems e-gold looks good withcharges wise and returns wise also its comparative to gold etf andgold fund. But one time demat account opening is required. Watsyour thoughts on it. do you think e-gold is risky in any way?

Thanks,sravi

Reply

Manish Chauhan


Your analysis is correct !

Reply

Ram

July 2, 2012 at 5:31 pm

Hi Manish



I found different banks are charging different premiums for Gold coins (in some cases, itis more than 15%) and Banks will not buy back the Gold. Then, there is no point ininvesting in Bank Gold Coins.

I found some reputed jewelers are selling the Gold coins/bars at Market value of 24ct.And they will buy back also.

Hence, I hope out of all the above options listed and detailed by you, purchase ofPhysical Gold coins/bars at No Premium from Reputed jewelers is the BEST OPTION.I hope this is the main reason for its popularity among Middle Class Indians. I thinkmore than 70% of Gold investment in India is done in this form only (Physical Gold barspurchased at Reputed Jewelers at No Premium charges).

Request you to pl. correct me if I am wrong.Regards, Ram

Reply

Manish Chauhan

July 5, 2012 at 10:45 am

Ram

If you are comfortable with jeweellers , then you can go ahead, but i m sure thechances of getting pure gold from bank is always higher , what do you say ?

Reply

Vandhana Karthick

July 17, 2012 at 1:29 am

Mr.Manish, Pure gold buying from bank is not that much easier..Injewellery shop they gold testing machine and we can check and nowa days you can check anywhere apart from where you buy.If we provewith loss of purity they will just refund or they will replace.But inbank price is little bit higher than shops and also only coins can bepurchasedYour articles are excellent and keep writing as nowusefullyAll the best..Is there a chance of guest post?

Reply

Manish Chauhan

July 17, 2012 at 9:39 am

Vandana



Vandana

THanks for you comment .

We do not take guest posts randomly,. we do it only whenwe know the person from long time and if he/she can givesome thing related to persoanal nance (no stock marketstuff) and somewhich does not exist already on the blog .

Reply

prasanna


i read in some news articles that banks are offering loans with e-goldas securitycan you tell me the names of some banks which offers e-gold or e-silver asa pledge and sanctions loans

Reply

Manish Chauhan

October 9, 2012 at 10:33 am

I have not heard of this till now, can you share the newssource !

Reply

prasanna


http://articles.economictimes.indiatimes.com/2011-05-

24/news/29577719_1_etfs-and-gold-e-gold-reliance-gold-

savings-fund

Reply

Manish Chauhan


Yes .. with this , it looks like some banks have started



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Yes .. with this , it looks like some banks have startedtaking that , but which banks it not clear, so youneed to ask to banks if they take it or not

Reply

smitha

June 26, 2012 at 2:45 pm

Hi Manish,

You wrote that at the time of selling gold, there is a discounted price of 5% to 10%. Wehave bought gold coins before and they said if it is the hallmark variety, we will get theprice of gold prevailing that day. No discounts or whatever.

Could you tell me what is this discounted price at the time of resale of gold coins/bar?

Reply

Manish Chauhan

June 26, 2012 at 5:36 pm

Smitha

The meaning for that was that if you sell gold coin/bar , you get lesser pricethan market price .

Reply

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