No one will have the doubt whether or not to buy gold but all that matters is “how to buy gold”? Even today, people are buying gold in the form of ornaments based on their need and requirement. Other buy gold as coins (buying gold as coins are no way beneficial and without this knowledge a lot of us buy and dump gold coins!) However if you are intended to buy gold for investment it is better to buy it as “paper gold” instead of physical gold that is ornaments or jewels or coins. On investment purposes, paper gold is most beneficial.
When you buy gold as ornaments or jewels there are two discomforts in it – first making charges and wastages and the second is to safeguard the jewel. To get rid of these troubles the right way to invest in gold is to buy paper gold.
What is a “Paper Gold”?
Gold will be bought with the money that we invest in and it will be given to us in units as per our investment. Whenever the gold rate goes up, the unit rates will go up as well. Now whenever we need money we can sell these units and make cash of it – this is called as “Paper Gold”. We can make direct profit of what we get through gold by investing our money in Gold ETF and in Gold Fund.
You will have a question between these two as which one is best, that is – Gold ETF or Gold Fund. Choosing the best between these two schemes is purely based on who you are and how much have you intended to invest in.
Gold ETF can be bought only through units. Units are available in half and one grams proportions too. The Gold ETF rates fluctuate parallel to the gold rates in the market. When the gold rate goes up the unit rates goes up too and vice versa. Demat account in required to invest in Gold ETF.
Fund collected through this scheme will be invested in Gold ETFs. The NAVs of these will change only once in a day. To invest in Gold Fund, one does not require demat account but PAN card is required and that is enough.
Charges for Investment in Gold ETF and Gold Fund
There are no charges to invest in Gold Fund even while you quit from the scheme after one year, there are no exit charges too. Whereas, brokerage charges are to be paid while buying and selling ETFs, additionally demat maintenance charges are applicable too. However, there is no difference between these two investment schemes as far as profit or returns are concerned.
There is possibility of SIP (Systematic Investment Plan) in Gold Fund and as little as Rs. 100 investment is also possible here. This is an advantage for small level investors. However, when you are buying ETFs it has to be bought only on “units”. Investment can be made by SIP too in ETFs but the investment amount will keep changing every month as per the gold rate changes since the investment here is on the basis of “units”.
Though there are more than 12 ETFs being traded in the market only a few ETFs have got better volume and others have got very less volume. Due to this, small investors may not be able to sell the units and quit whenever they wish to do so. But it is not the same in Gold Funds as one can withdraw money from funds anytime as they wish.
Other than these, small investors can invest on gold in National Spot Exchange too and the limits are not a bar as you can make investment even for 1 gram. This gold will also be in demat format. Also, there is facility to buy it in the form of gold too. But to buy 1 gram gold, Rs. 100 has to be paid for each gram. For 8 grams Rs. 400 has to be paid and to convert 100 grams no charges are required. In India, this opportunity is available only in certain cities.
So, if you have known thoroughly and better about “Paper Gold” investment method it is one of the safest and coolest methods to make your investment. Small investors can go for Gold Funds and moderate or high investors can go for Gold ETFs.