Last Updated on 3 months ago by Raj Kumar

How to invest in gold in India – 5 Best ways to buy Gold

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

Although gold prices have fallen quite a bit in 2021 ; Gold prices have been steadily going up in 2020 so we have seen huge interest from investors to invest in Gold. Considering FD returns are negligible- Investors are looking for an investment option that will fetch them good returns on their investment with less risk. Everyone is looking for an answer to how to invest in gold in India?

How to invest in gold in India / Best ways to buy 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 / Best ways to buy 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 bond 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

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.

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

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.

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 name	Market Cap in cr
HDFC Gold ETF	658.03
UTI – Gold	595.54
SBI Gold ETF	325.5
Axis Gold ETF	317.21
IDBI Gold ETF	150.59
Birla Gold ETF	99.62
Invesco India	48.91
Nippon ETF Gold	4.27

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

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. You gave to pay 3% as GST for purchasing digital gold.
3. Tempted to sell it if gold prices move higher.
4. Have to Pay extra fees if willing to take physical delivery.

4. Buy Gold ETF mutual funds

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 name	Asset size	1month	3months	6 months	1 year	3 years
Nippon India ETF Gold BeES	3650.43	0.06	13.82	23.53	49.17	16.73
ICICI Prudential Gold ETF	1237.79	0.08	13.51	23.13	48.88	16.34
SBI – ETF Gold	1175.12	0.07	13.94	23.71	49.51	16.7
HDFC Gold Exchange Traded Fund	1093.07	0.12	14.02	23.58	48.59	16.95
UTI Gold Exchange Traded Fund	534.48	0.03	13.87	23.49	49.07	16.86
Axis Gold ETF	188.53	0.06	13.53	23.19	49.22	16.85
Aditya Birla Sun Life Gold ETF	153.06	0.56	14.59	24.39	50.32	17.01
Quantum Gold Fund	88.69	0.11	13.93	23.58	49.1	16.68
IDBI Gold Exchange Traded Fund	78.67	0.1	13.69	23.25	48.56	17.07

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 bond from Govt of India

If you are thinking to invest in Gold for the long term then investing in Sovereign gold bond 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?

You can buy Sovereign gold bond 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 bond 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:-

Criteria	Physical Gold	Digital Gold	Sovereign gold bond from Govt of India	Gold ETF	Gold Mutual fund
Investment limit	No Limit	Min investment Rs 1	Min investment 1 gram	Min investment 1 gram	Min investment Rs1000
Safety	Risk of Theft	Safe	Safe	Safe	Safe
Purity	Purity not assured	High	High	High	High
Charges	High(10-15%)	Low – around 4%	No charges	Expense ratio approx 1%	Expense ratio approx 1-2%
Ease of buy/Sell	Low	Anytime	Specific date	Market hours	Market hours
Purchase Price	Varies between places	Fixed	Fixed	Varies between ETF	Varies between fund
Liquidity	High	High	5 Year lock in	High	High
Tax benefit	No	No	Yes	No	No
Interest	No	No	2.5% p.a	No	No
Where to buy	Shops	Online portal	Online portal	Demat/Trading account	AMCs/MF platforms

Consider reading – Top 10 Best investment options in India

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

Closing thoughts on how to invest in gold in India

Looking at the pros and cons investing via Sovereign gold bond scheme seems to be the best way to invest in Gold in India. You can also consider buying Gold ETF/Gold Mutual to invest in Gold.