Gold as an asset class has a history of thousands of years. Gold probably is the most popular asset class for investment tremendous liquidity it offers. Gold offers a store of value and it has proven itself an effective hedge against inflation.
Investment in Gold
There are different ways in which one can invest in or buy Gold:
- The default way of investing in gold is simply buying gold in physical form as jewelry or as gold coins/bars.
- Gold ETF
- SGB (Sovereign Gold Bonds)
- Gold Futures on MCX
- Gold Deposit Receipts (soon to launched)
Gold in the form of jewelry, coins and bars defintely looks attractive but may not be best way to invest in gold. When someone buys gold jewelry he ends up paying good amount on making charges. Making charges on gold jewellery in India range from 3% to 25%, or a flat rate per gram of gold. Also there are wastage charges during making of jewellerby which also range from 5% to 15%. So you end up in paying good amount of extra charges when you buy gold in the form of jewellery. Also to keep the jewellery secure, either someone needs to have good bank locker. Thus buying gold in physical format does not turns out very cost effective from investment point of view and returns are greatly reduced because of this.
Buying gold in electronic format offers excellet alternative to physical buying of gold. When you buy gold electronic format you also bypass the making charges, bank locker charges. This helps you in increasing yield on your investment in Gold.
Read more about
- Understanding Gold ETFs - A Wise Investment Choice
- Understanding Sovereign Gold Bonds (SGB) in India