In India, whenever it comes to keeping the savings in a safe place, the first thing that comes to mind is gold. But in today's changing times, the real question is no longer whether to buy gold or not, but the challenge is that which is the best and most profitable way to buy it? Today, the facility to invest money in gold is available in the market not only through goldsmith shops but also through digital platforms and stock markets. Investors mainly have three options, physical gold (jewellery), digital gold and gold ETF. All three have their own advantages and disadvantages. Let us understand the whole mathematics which of these will be the best way for you to earn your hard-earned money.
Buying gold jewelery on special occasions like festivals or weddings is an important part of our culture. However, if you are looking at it only through the lens of investment, it may prove to be a bit of a loss-making deal. Market analyst Rohan Goyal explains that when you buy jewelery from the market, you have to pay 3 percent GST and a heavy 'making charge' ranging from 8 to 25 percent along with the price of gold. The real problem comes when you go to sell it back. While selling, you neither get back the tax money nor the making charges. On top of that, there is always a doubt regarding purity. Therefore, while wearing jewelery is great for fulfilling one's hobbies, it is not considered a good option for expecting net profits and investment.
If you do not have a large amount of money to invest and want to start with just Rs 100 or Rs 500, then digital gold seems to be a very convenient option. Today many e-commerce and major payment platforms are providing easy facility of buying and selling. In this, there is no tension of keeping the gold safe at home or heavy expenses of bank locker. But, there is another aspect to this also. Digital gold in India does not come under the direct purview of any central institution, such as the Reserve Bank (RBI) or SEBI. Due to this lack of regulation, there is always a hidden risk regarding transparency and security. Apart from this, an interesting consumer trend is that people immediately sell digital gold as soon as they see a profit of 10-15 percent. Due to this, they do not get the magical benefit of 'compounding' i.e. interest on interest in the long run.
For those who want a combination of security, transparency and excellent returns in investment, Gold ETF (Exchange Traded Fund) is emerging as the smartest option. Its biggest feature is that it is fully regulated by SEBI. These can be easily bought and sold in the stock market like the stock of any common company. There is neither fear of theft nor any concern about purity. After Budget 2024, this option has become even more attractive for investors. According to the new rules, now only 12.5 percent tax is levied under Long Term Capital Gain (LTCG) on selling gold ETF after holding it for 12 months. In contrast, the time limit for availing this tax benefit in physical and digital gold is 24 months. However, to invest through this medium, it is mandatory for you to have a current demat account.
Experts also believe that your money should be invested according to your needs and goals. Market experts clearly say that ETF is the most transparent means for net profits, whereas jewelery should be bought only for personal use. Digital gold can be used for small and regular savings, but to build a strong wealth in the long term, financial instruments like ETFs prove to be more effective.
