types of gold investment

Types Of Gold Investment – Purchase Quality Of Gold

Do you know different types of gold investment? – while investing in gold many investors are not aware of the multiple types of gold investment, they only consider the physical gold investment which restricts the investment options that may cause a loss in future profit. Therefore in this article, we are going to explain all concepts about gold investments such as how to buy gold as an investment? gold investment vs mutual fund, types of gold investment, what is paper gold investment, etc.

How to buy gold as an investment?

Nowadays, it is easier to invest in gold than in the old days because it was a little difficult to invest in gold at that time, it required sufficient savings as per the market price and they preferred the physical method of investing in gold. But now there are many ways and different types of gold investment available that allow you to start investing from a minimum of Rs.100 and there is no limit to the maximum investment.

Types of gold investment

types of gold investment

As we discuss above, there are different types of gold investments are available that are listed as follows:

  • Physical Gold – Investing in physical gold is a common part of the investment portfolio. The physical gold investment has not required any type of Demat account. Physical gold is available in the form of gold jewelry, coins, bullions, artifacts. The price of gold totally depends on the current market price and other than the gold amount no additional charges are required. The investor has direct ownership in this type and it keeps value, it is a major advantage. But it is also riskier, you have to store it in private vaults with low liquidity which charges higher processing fees. Hence, people prefer gold bullion because it has lower costs and high liquidity as compared to gold coins and gold jewelry. There is no paperwork is required for this investment but a systematic investment plan is also not available and gold as an investment option is the best suited for conventional investors.
  • Gold ETFs – Gold ETFs include physical gold investment and stock investment together.  In simple words, the investor buys the value of gold through the paper but not in physical form. It represents physical gold in paper or materialized form which is also listed in the National Stock Exchange of India (NSE) and Bombay Stock Exchange of India (BSE) like other stocks. For this investors need the Demat account. Gold ETFs are affected when gold prices fluctuate. It involves brokerage and asset management fees. There is no Systematic Investment Plan (SIP) option. It is the best way for investors who have enough time and the best skill set to invest.
  • Gold Mining Stocks – It is a way of investment where the investor is invest in shares of gold mining companies. The future earning of the company decides the growth and returns of the stocks. Hence, if you want to make an investment you need to check factors such as production cost, project development, mine exploration, effective management, etc. There are around 300 gold mining companies are listed and most are listed outside of India like Canada, the US, the UK, Australia. The Indian resident can invest in global stocks via mutual fund which invest in mining stocks.
  • Gold Options and Future – It is nothing but trade investment where the trader needs a demat account with ‘Gold Future and Options’ service through which he invests in gold. For the experienced investor, it is the more suitable option of short term investment but options are risky as well. The major advantage is with the small and less amount of money investors can control the large investment and it expires within a fixed period of time. It is an agreement where investors buy or sell securities for a specific price on a certain date according to current market conditions.
  • Gold Bond – Sovereign Gold Bonds are replaced with physical gold these are government securities represents in grams of gold. If you want to invest then you have to issue the bonds in cash and also redeemed them in cash on maturity. It is a great alternative to gold investment which is less risky and gives you high fixed interest like banks give. The minimum investment is 1 gram and the maximum you can buy 4kgs per investor per financial year. The interest rate on the gold bonds is 2.50% per year and is paid every six months.

Gold Investment Vs Mutual Fund

gold investment vs mutual fund
Gold Investment Mutual Fund
1.It is a functional asset and commodity.It is a pure form of investment.
2.In physical gold, you can invest a minimum of Rs.10000 and in digital gold minimum investment is Rs.1.For initial investment in Systematic Investment Plan, the minimum investment is Rs. 500.
3.The investment is managed by owner itself.The professional market expert is managed the entire investment.
4.It is more liquid than mutual fund.It is less liquid than gold.
5.Gold investment not involves any diversification.Mutual funds involve high diversification through investing in a variety of securities.
6.It has no variant or types only has a quality parameter.It has many variants that are based on different funds.

what is paper gold investment?

what is paper gold investment

The paper gold investment, as mention in the name itself, is entirely done through the paper or agreement where the investor buys or sells gold using the agreement so that he/she did not worry about storage which also saves the storage fees.

Gold investment pros and cons

Pros Cons
1.Gold investment is a long term investment that is beneficial for a tough time.The physical gold investment involves a high risk in terms of theft or burglary.
2.It is a high liquidity investment, you can easily convert your investment into cash.It required a safe and enough storage like in a bank’s locker but it also charges annual fees.
3.No Demat account is needed for physical gold investment.For gold ETFs investment Demat account is necessary.
4.It diversifies your investment portfolio and reduces risk.It is not a passive investment like stocks, bonds.

Conclusion

In terms of gold investment, it carries good future returns but at the same time, it has risks also. In India, there are different types of gold investments are available now and they are also not required huge amounts of money so now it become very easy to invest in gold.

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