March 14, 2013
You may be so familiar with one type of Investment, Gold. Most of your investment in gold is supposed to be as Jewelry and some of them may in the form of Bars and Coins. Many People in India have been so curious about purchasing Gold for Investment purpose as well as to show their wealth to others. India is the one of the countries which imports more Gold than any other countries in the world. Many of the households have their own share of Gold irrespective of their standard of living. So, Gold Investment is holding a big part in every family’s investment. It can be used as Hedging against the losses arising from other investments. Gold has delivered better returns so far.
Advantage and Disadvantages of Buying Gold Physically:
People in India usually buy Gold in its physical form and keep it in their wardrobe or safety locker. They either pledge or sell it whenever they needed money for other purposes. It is one of the big advantages of keeping Gold in its physical form so that they can be easily pledged in Banks and other Financial Institutions. Banks prefer to give loans for pledging gold as Jewelry.
Apart from pledging, if Gold is sold as jewelry or bars or coins, there are charges like making charges, wastage deducted from its value. So, investing in Gold physically has disadvantage of losing its value.
Banks don’t buy gold and they allow only for pledging. Jewelry shops allow only exchanging the gold.
What is Gold ETFs?
Exchange Traded Funds (ETFs) are just like Mutual Funds where Investors buy units of particular Fund. Unlike Mutual Funds, ETFs are traded on Stock Exchange and can be bought and sold during the business hours through a Broker. In order to buy and sell ETFs, you need to have a DEMAT Account. Gold ETFs is one type of ETFs which are traded on Stock Exchange.
Advantage of Buying Gold ETFs:
- Purchasing and selling E-Gold is easy and closely corresponds with the actual price of the gold in the market. The price is very transparent.
- One Unit of Gold ETF purchase is equal to one gram of gold.
- There is no need to lock the gold and it is very safe from theft.
- The Gold ETF doesn’t come under Wealth Tax
- No Making and Wastage Charges.
What is Gold Mutual Funds?
Those who don’t have a DEMAT Account can buy Gold Mutual Funds. These Funds invest the money in Gold ETFs and the shares of Gold Mining Companies. Buying and selling of Gold Mutual Funds are just similar to other Mutual Funds. (Buy Gold)