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We love our gold, especially on auspicious occasions like Diwali.
While at Value Research, we do not advise investing in gold because it doesn't grow your wealth in the long run; we tell you which is the best way to buy gold.
Let's first look at the pros and cons of holding physical gold.
1. Physical gold
There are more disadvantages than advantages.
- High risk of theft and loss.
- Keeping it in a safe place, say a locker, attracts further charges.
- In fact, the only advantage of buying gold in its physical form is emotional satisfaction.
2. Gold funds and exchange-traded funds (ETFs)
The good news is you don't have to run the risk of holding physical gold. You can even plan an SIP.
However, they have significant downsides.
- For one, gold funds don't get indexation benefits anymore. Put simply, your tax liability will be higher.
- You pay an additional investment management fee, and in the case of ETFs, even a brokerage additionally.
3. Sovereign Gold Bonds (SGBs)
At Value Research, we recommend SGBs as the best option to buy gold.
SGBs, issued by the RBI, are a safe, reliable alternative to holding physical gold.
On Diwali, you can purchase SGBs from the Stock Exchange.
Advantages
- You can buy SGB from the stock exchange at a discounted price, which means you can buy more for the same amount of money!
- If you hold SGBs till they mature (eight years), your income is tax-free.
- What's more, they ensure a guaranteed 2.5 per cent return every year, which is over and above the price of physical gold. The interest, though taxable, is paid equally twice a year, which makes it a compelling option for certain investors.
The last word
When you think of buying gold, think of getting Sovereign Gold Bonds (SGBs).
Also read: The golden journey
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