Why invest in gold? What are the benefits of investing in gold? Learn how to invest in gold and how to buy gold online in India in this gold investment article.
Indians really don’t need to be educated on the benefits of investing in gold as a gold investment in India is one of the most popular investment options and asset classes.
Today, users have many ways to buy gold online – from gold jewellery and physical gold coins to digital gold – and mobile apps such as indiagold provide of all these gold purchase options.
For Indians, buying gold is mostly need-based rather than for investments. We buy gold during weddings, festivals, religious functions and for prestige.
Gold is given to Hindu women in the form of Stridhan at the time of marriage and a Hindu woman has inalienable rights over her Stridhan. She can claim her rights over it even after her separation from her husband.
That’s one of the reasons Indian women value their gold so much and gold is close to their heart as an investment in good times and bad. Consumers in India buy gold throughout the year.
If you’re wondering if gold is a good investment, is it good to invest in gold and how to buy gold, this article will attempt to answer all your questions about buying gold in India.
4 Benefits Of Investing In Gold
Is buying gold a good investment? Is it worth investing in gold? Is it wise to invest in gold? How can I invest in gold? These are some of the questions that plague investors who consider investing money in gold.
So, why invest in gold? And what is the function of gold in a portfolio? In his webinar on Investing in Gold, Mr Krishna Hegde, CFA, of CFA Society India, discusses the benefits of investing in gold and how to invest in gold in India.
Here are some of the gold investment benefits highlighted in the presentation:
1. Portfolio Diversification
Gold is important for Portfolio diversification. It has different characteristics as compared to other precious metals like silver, copper, or platinum. These differences are in regard to its volatility, returns, external market conditions, and the like.
So how much of your portfolio should you allocate to gold? How much you allocate for gold in your portfolio depends on your reasons for investing in gold.
If you’re investing in gold for the purpose of diversification or a hedge against inflation, a 10 to 20% Allocation reduces standard deviation significantly with a small decline in average returns. Higher allocations do not help proportionately.
If you want to invest in gold as a Safe Haven, a 5 to 20% allocation can be justified given current circumstances to get a good risk-reward from a portfolio construction standpoint. For a common investor, it makes sense to allocate 10 to 15% in gold at all times.
2. Safe Haven Asset
Gold’s global trade makes it a hedge against inflation and currency depreciation. In normal times, it maintains pace with inflation and protects the purchasing power of the capital.
During bad times, gold acts as a wonderful hedge in the portfolio. Gold has near-universal confidence and is also used as a proxy currency which is an accessible retail asset.
That’s why it is seen as a Safe Haven Asset in a crisis and during periods of high volatility. These situations could include a pandemic, financial crisis, war, or socio-economic disturbance in the country.
When there is a lack of faith in the global currency in a crisis, gold is seen as a more reliable investment and a good store of value in situations of high volatility, the demand for gold increases because gold is a high-value asset and is portable and liquefiable.
3. Delivers Positive Returns
Gold has delivered significant positive real returns (subtraction inflation) and did well during periods of both low and high inflation and can preserve it’s purchasing power for a longer duration of time. The perception of gold has changed recently as prices have gone due to a function of demand and supply.
Gold prices in May 2019 were ₹32470/10gm and in July 2020 they jumped to above ₹51000/10gm (current gold price at the time of writing). These impressive 40% gold investment returns make it the best performing asset class.
Today, with the low-interest rates, it doesn’t make much sense to put your money in banks, especially with prospects of inflation. So, experts recommend investing in gold and increasing your holdings over time, which serves as a long-term investment.
4. Excellent Future Prospects
So, is it a good time to invest in gold? Yes, because astute investors like Seth Klarman and Ray Dalio are predicting a further increase in the prices of gold and are vouching for it as a significant asset.
How To Invest In Gold In India
Wondering how to invest in gold in India? Here are 10 gold investment options for Indians.
1. Gold Jewellery
Gold jewellery, while easily accessible, has a high markup which includes the price of gold, the making charges, the GST and the wastage. So you end up paying much more for jewellery than the actual cost of gold.
However, 24 karat gold is too soft for use in making jewellery, so gold jewellery-making requires the addition of other alloys to make it suitable for jewellery, which typically comes in 18 karats (fashion jewellery) or 22 karat gold jewellery.
This dilutes the amount of gold present in the jewellery to different amounts, so you never really know how much gold is actually present. And, should you want to sell your gold jewellery, each jeweller will give you a different price for it, so the resale value of gold suffers when you purchase gold jewellery.
So, for gold jewellery, the cost of gold is quite high while the trading error is medium. Liquidity for such an asset is also low, but it is quite accessible and doesn’t have a lot of tax benefits.
2. Physical Gold
Gold coins and gold bars (or gold ingots) are known as physical gold. Minted bars (shiny, polished bars) come at a premium as opposed to cast bars. When you buy gold coins or gold bars, you own the physical gold coins or gold ingot and can save it in a safe place.
However, there is a markup for the supply chain, cost of transport, and cost of storage in a bank locker. Liquidation is not that easy and you may get a different price from different jewellers for the same gold coin.
Owning physical gold has never really been a short-term opportunity to make money. As the experts say, people are protecting themselves over the short term, else to make some money to grow their portfolio.
3. Gold Bullion
What is gold bullion? It is a form of high-quality physical gold and is usually maintained by governments and private citizens as an emergency currency.
Usually, the cost and trading error for Bullion is low, and it is extremely liquefiable and accessible. Although bullion has low tax benefits, it is one of the most profitable forms of gold.
4. Paper Gold
Paper gold is basically a paper which certifies that you own physical gold. It allows you to buy gold in certificate form from a jeweller.
Paper Gold is highly accessible, has a low trading error, and the tax benefits are reasonable. However, it is quite costly, not very liquefiable, and cannot be sold in the market, but it can be converted into jewellery.
5. Gold Shares Or ETFs
Gold Shares, Gold Stocks, or Gold Exchange Traded Funds (ETFs) are a commodity ETF where Gold is traded on the exchange as an individual stock. Both Gold ETFs and gold fund-of-funds invest in physical gold and deliver returns close to physical gold.
You have to account for the gold trading fee, trading error, and the low tax benefits, but it is highly liquefiable and accessible. Wondering how to invest in Gold ETFs? You’ll require a Demat account, which not every housewife in India may have access to.
Before you invest in gold shares or gold ETFs read the latest gold investment news and do your due diligence on researching the best gold investment funds.
6. Gold Futures
Gold Futures can be purchased on MCX and are a contract with a specific date when the individual takes the gold with an initial payment and another date to complete the transaction.
Gold futures investing is not so costly and comes with low trading errors and tax benefits. Also, it’s highly liquefiable and accessible.
7. Gold Funds
World gold funds invest in units of funds that in turn invest in the stocks of gold mining companies listed overseas. Currently, there are two such mutual funds investing in gold available to investors in India – DSP World Gold and Kotak World Gold.
Gold Mining Mutual Funds are based on the value of gold buried in the ground. The downside of this investment is that tracking errors, geopolitical risks and mine-seizure by hostile governments could change the value of the mine. On the upside, more gold discovered could be good for your investment.
8. Sovereign Gold Bonds (SGB)
If you’re looking for ways to invest in gold online, investing in Sovereign Gold Bonds (SGB) is generally considered a good bet as it offers interest along with price appreciation which no other gold investment offers.
SGB is an easy route to enjoy exposure to gold investing as it is a substitute for physical gold, and can be easily sold through banks and designated government offices.
Investors who do not have a proper allocation to gold can invest in SGBs. They get an annual interest rate of 2.5% and capital gains at maturity, if any, are tax-free. Savvy investors can play the cycles to make an extra buck.
9. Digital Gold
According to Ravish Bhatia, Digital Gold is a form of bullion buying where you can buy gold at a live price, for any amount of your choice. It is saved in an insured locker maintained by a gold bullion provider.
The concept of Digital Gold is a way to democratize investing in gold with the idea of making gold accessible to everybody. When you invest in Digital Gold, you invest in pure gold or 24 karats gold for the purpose of investment. This gold is typically 995 and above purity.
10. Liberalised Remittance Scheme (LRS)
Another way of investing in gold is through overseas options via the Liberalised Remittance Scheme (LRS).
The upside of this option of investing in gold is that it removes domestic price distortions and offers more choices to mitigate country and entity risk. The downside is that the minimum size required is high and the cost and time taken to setup can be high.
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How To Buy Gold Online
Wondering how to invest in gold online? Gold funds, gold shares and Sovereign Gold Bonds (SGB) can all help you buy gold online. You can also buy gold bars online but must ensure you buy gold ingots online from reliable gold dealers only.
Wondering where to buy gold coins? If you’re interested in purchasing gold coins, the best gold coins to buy might be the ones sold through your bank’s website as you can sell them back to your bank anytime and liquidate your investment.
You can also buy gold coins online from jewellers’ websites or apps like indiagold, or could wait for gold sales or auspicious days when they have discounts or bonuses on offer.
Except for apps like indiagold, most options to buy gold online involve significant expense and risk and are not accessible for most women in India. Also, there are some restrictions on buying gold in retail stores, resulting in a rise in demand for digital gold.
This increase in demand for online and digital gold, apart from gold bars and gold coins, may continue for another 1 to 2 years. So, as an Indian woman, where can you buy gold online in small amounts, if you don’t have a lot of money to spare?
If you’re looking for ease of gold purchase and small transaction size, Digital Gold is one of the best ways to buy gold online, especially for Indian women and housewives who don’t have a lot of funds to invest.
So, if you’re a housewife in India wondering, “Can I invest in gold and can I buy gold today?” the answer is yes! If you want to buy gold online in small amounts through easy online transactions and from trusted gold bullion dealers, your best way to invest in gold in India is to buy bullion in the form of Digital Gold.
How To Buy Digital Gold Online
Digital Gold is democratizing gold investing by allowing anyone, no matter how much their income or investment knowledge, to buy gold bullion online.
The idea behind digital gold is to make gold purchase accessible to everybody and apps like indiagold offer easy, 24/7 access to gold purchase options where you can buy gold online for as little as ₹1.
For that reason alone, Digital Gold could be the best gold to buy and best gold investment for women in India who cannot afford to spend huge amounts but believe in the benefits of investing in gold.
How Do I Create A Gold Investment Account With Indiagold?
The indiagold app is India’s only mobile app where you can buy and sell 24 karat gold with BIS Hallmark certification online any time for as low as ₹1. It provides an easy to use interface and you can download it from the Google Playstore.
The gold prices on indiagold are usually 8% to 11% lower than other online brands including Tanishq and Carat Lane. On this app, with a few clicks, you can sell gold even during the Lockdown and withdraw the money to your account.
Here’s how to create a gold investment account with Indiagold:
- Create a new account on the app by entering your contact number and receive an OPT to authenticate your account. Now you can start your savings in digital gold.
- You can save as much as you want according to your budget, starting as low as ₹1, and buy digital gold in a few minutes.
- This 24 karats investment-grade gold can be purchased through UPI or your bank account, and also comes with the ease of making a transaction from anywhere in the world.
- When you buy Digital Gold worth ₹1, an equivalent amount of physical 24 karat gold is deposited in your name in a secure vault maintained by Augmont Gold – India’s leading refinery and manufacturer of gold – on your behalf.
- You own this gold 100% and can access or sell your digital gold through the indiagold. You’re also provided with a locker (stored by Augmont) to see your gold savings.
- You can use your gold balance to buy 18/22 karat gold coins and gold jewellery any time through the indiagold app.
While you can buy Spot Gold by paying full price, “Gold on EMI” is an exclusive product only available on Indiagold, making it affordable, easy and safe for every Indian woman to buy gold.
It allows you to purchase 22 karat gold BIS Hallmarked jewellery of 916 purity such as chains, bangles, rings, pendants and earrings without paying the full price upfront and get delivery of your favourite gold item.
The best part is you can book at today’s price and they’ll lock it for you, so you can stop worrying about increasing gold prices. You pay only 20% booking amount and rest in an easy and convenient instalments of 3, 6 or 9 months.
So, if you’re wondering if this is the right time to invest in gold, many investment experts believe that, yes, it is the best time to invest in gold and your gold investment today could grow considerably down the line.
There’s no better time to invest in gold, and we hope this gold investment advice on ways to invest in gold, how to purchase gold online, and how to invest in gold in India, proves useful in helping you buy gold online and invest in this asset class.
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Disclaimer: All investments, including real estate, are speculative in nature and involve substantial risk of loss. The ideas and strategies on this website are based on personal opinion. They do not and should not be considered as professional financial investment advice and should never be used without first assessing your own personal and financial situation, or without consulting your professional investment advisor. We advise you to do your due diligence before acting on any information that we publish and do not, in any way, warrant or guarantee the success of any action you take in reliance on our statements or recommendations.