how to invest in gold in India – 5 Best ways

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How to invest in gold in India – 5 Best ways

After real estate, Gold is probably the most sought investment option in India. Especially in South India; Gold is considered the safest investment choice!

Gold prices have been steadily going up recently so we have seen huge interest from investors to invest in Gold. Considering markets are down, FD returns are negligible- Investors are looking for an investment option that will fetch them good returns on their investment. Everyone is looking for an answer to how to invest in gold in India?

how to invest in gold in India?

There

are various ways you can invest in Gold in India. The top 5 best ways to invest in gold in India are as below:-

  1. Buying Physical gold
  2. Buy Gold ETF
  3. Buy Digital Gold
  4. Buy Gold ETF mutual funds
  5. Buy Sovereign gold from Govt of India

We will talk about each investment option in details in this article and we will go through pros and cons of each options. 

1. Buying Physical gold

Rating: 2 out of 5.

You can buy physical gold from a jewellery shop near you in form of ornaments of Gold bars. When you buy Gold inform of ornaments, most likely you will be paying making charges which most likely is around 10-15% of the Gold value.

how to invest in gold in india
how to invest in gold in India – Physical gold

The pros and Cons of buying Physical Gold is as below:-

Pros – 

  1. You can keep the gold with you all the time.
  2. If the Gold is Jewellery, you can wear it for your use.
  3. You can walk into any shop and buy Gold.

Cons-

  1. Making charges eat up most of the cost of Gold value
  2. When you try to sell the jewelry you may not get the full value of Gold
  3. Risk of Theft

2. Buy Gold ETF

Rating: 4 out of 5.

If you are thinking to buy Gold purely from an investment point of view then Gold ETF is one of the best options for you. You can buy Gold ETF just like stocks.

Gold ETF
Gold ETF

How to buy Gold ETFs?

To buy Gold ETF you will need a demat account and a trading account. There are listed Gold ETFs on exchanges which you can buy them just like stocks. Few of the listed ETFs are below:-

ETF nameMarket Cap in cr
HDFC Gold ETF658.03
UTI – Gold595.54
SBI Gold ETF325.5
Axis Gold ETF317.21
IDBI Gold ETF150.59
Birla Gold ETF99.62
Invesco India48.91
Nippon ETF Gold4.27
how to invest in gold in India – Gold ETF

The pros and Cons of buying Gold ETF is as below:-

Pros:-

  1. Can be purchased and sold like a stock which makes it the most liquidated investment in the gold category.
  2. Track the latest price of gold.
  3. No making charges. Expense ratio of around 1%.
  4. No reason to worry about Theft.

Cons:-

  1. You will not have Gold physically with you as like Jewellery which you can wear anytime.
  2. Temptation to sell the ETF when the Gold prices moves higher

3.Buy Digital Gold

Rating: 4 out of 5.

You can buy digital Gold from many websites like Paytm, HDFC Sec Digigold etc.

You can buy Gold online by just a button click and you have Gold with you. Once you buy them then the Gold is stored securely for you. The company charges money to you to store the Gold safely. You also have an option to get the delivered to your door step by paying a fee!

How to buy Gold online?

You can visit websites of Paytm, HDFC Sec etc. They have a dedicated section for you to buy Gold online.

Is it safe to buy Gold online? –  Most of the time investors think whether it is safe to buy Gold online? – The answer is YES!. The online buying and selling of Gold are monitored by agencies and the chances of fraud are very very less!

The pros and Cons of buying Digital Gold is as below:-

Pros- 

  1. Hassle free online purchase.
  2. You can purchase digital gold with as low as Rs 1.
  3. Guarantee of purity.
  4. Buy and sell at any point in time with few clicks.
  5. No making charges. Buy and sell difference – 2.95% (It covers the cost of physical gold storage, platform maintenance, etc).

Cons-

  1. Not having physical gold with you to wear it for occasions.
  2. Tempted to sell it if gold prices move higher.
  3. Have to Pay extra fees if willing to take physical delivery.

4. Buy Gold ETF mutual funds

Rating: 4 out of 5.

The Indian Mutual fund market has progressed really well in the past and helped investors to give options to invest in instruments via mutual funds. You can easily buy Gold ETF mutual funds now without worrying about having a Demat account etc. You can just simply buy a Gold ETF mutual fund with a button click! There are many Gold mutual funds in the market some of the mutual funds with their return as on 22-05-2020 are:-

Mutual fund nameAsset size1month3months6 months1 year3 years
Nippon India ETF Gold BeES3650.430.0613.8223.5349.1716.73
ICICI Prudential Gold ETF1237.790.0813.5123.1348.8816.34
SBI – ETF Gold1175.120.0713.9423.7149.5116.7
HDFC Gold Exchange Traded Fund1093.070.1214.0223.5848.5916.95
UTI Gold Exchange Traded Fund534.480.0313.8723.4949.0716.86
Axis Gold ETF188.530.0613.5323.1949.2216.85
Aditya Birla Sun Life Gold ETF153.060.5614.5924.3950.3217.01
Quantum Gold Fund88.690.1113.9323.5849.116.68
IDBI Gold Exchange Traded Fund78.670.113.6923.2548.5617.07
Invesco India Gold Exchange Traded Fund

The pros and Cons of buying Gold ETF Mutual fund is as below:-

Pros:-

  1. Can be purchased and sold like a stock which makes it the most liquidated investment in the gold category.
  2. Track the latest price of gold.
  3. No making charges. Expense ratio of around 1%.
  4. No reason to worry about Theft.

Cons:-

  1. You will not have Gold physically with you like Jewellery which you can wear anytime.
  2. The temptation to sell the ETF when the Gold prices move higher

5. Buy Sovereign gold from Govt of India

If you are thinking to invest in Gold for the long term then investing in Sovereign gold from RBI (on behalf of Govt of India) is the best option for you. You will not only get the Gold at best price but Govt will also give you an early interest of 2.5% for your holding!

On top of this, you will get tax benefits when you sell the Sovereign gold from Govt of India on its maturity (this option is not available for any of the above options).

How to invest in Sovereign gold from Govt of India?

Rating: 5 out of 5.

You can buy Sovereign gold from Govt of India online/offline from below sources:-

  1. Post offices
  2. From public and private banks

The pros and Cons of buying Sovereign gold from Govt of India is as below:-

Pros-

  1. This scheme is backed by Govt of India- so this assures the highest level of security
  2. The purity of Gold is guaranteed
  3. RBI will provide you 2.5% interest yearly on top of Gold price increase
  4. The minimum investment is 1 gram
  5. Tax-free at maturity. If you buy and sell Gold from other sources after years you will need to pay 20% tax with indexation benefits but Sovereign gold from Govt of India at maturity!

What is the best way to buy Gold in India?

We hope the above details have given you a detailed view of how to invest in gold in India. In conclusion, here is a comparison between all the investment options we have discussed so far:-

CriteriaPhysical GoldDigital GoldSovereign gold from Govt of IndiaGold ETFGold Mutual fund
Investment limitNo LimitMin investment Rs 1Min investment 1 gramMin investment 1 gramMin investment Rs1000
SafetyRisk of TheftSafeSafeSafeSafe
PurityPurity not assuredHighHighHighHigh
ChargesHigh(10-15%)Low – around 4%No chargesExpense ratio approx 1%Expense ratio approx 1-2%
Ease of buy/SellLowAnytimeSpecific dateMarket hoursMarket hours
Purchase PriceVaries between placesFixedFixedVaries between ETFVaries between fund
LiquidityHighHigh5 Year lock inHighHigh
TaxNoNoYesNoNo
InterestNoNo2.5% p.aNoNo
Where to buyShopsOnline portalOnline portalDemat/Trading accountAMCs/MF platforms
How to invest in gold in India

Consider reading – Top 10 Best investment options in India in 2020

New to mutual funds – How to select mutual funds India?

What is the best way to invest in gold in India?

If you are looking to buy gold purely from an investment perspective then the best way to invest in Gold in India is to buy Sovereign gold bonds from Govt of India. These bonds give you an additional 2.5% interest on top of Gold price which no other instrument gives. Its 100% safe as it’s backed by Govt of India.

Is investing in gold a good idea in India?

Investing in Gold is an excellent idea if you want to hedge your investment against falling rupee. Gold provides you a safe heaven in the time of recession when it’s price shoots up. Every investor should have some of their portfolio allocation into Gold.

How do I start investing in gold?

You can easily buy Gold mutual funds online. There are so many online platforms like PaytM Money, Grow etc which provide free of charge investment in Gold mutual funds. Alternatively, you can also buy Gold mutual funds from the respective AMC website.

Is it the right time to invest in gold?

Gold prices tend to go up when there is a recession round the corner. In 2020, when markets all over the world are facing uncertainty, it’s a great time to buy gold. Please remember that Gold has recently rallied a lot in 2020(while we are writing this in August 2020); investors can look to enter into Gold when there is a correction.

What is the cheapest way to buy Gold in India?

Buying Gold mutual funds/ Gold ETFs / Sovereign gold bonds from Govt of India are the cheapest way to buy Gold in India as they don’t involve in making charges etc.


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