How to Invest in Gold

Many precious metals exist, but gold has remained a popular favorite among people from all walks of life for various reasons. Many people are extremely sentimental about gold and consider it a precious metal that is best suited for auspicious occasions and key milestones in life. For others, gold investments are of particular importance because the yellow metal is often considered a reliable hedge against inflation and uncertain economic periods. 

If you want to invest in gold and benefit from its inflation-proof advantage, you need to know of the different ways to add gold investments to your portfolio. This article can give you more clarity about the different gold investment plans and options and how to invest in gold as a beginner.

How to Invest in Gold: Gold Investment Plans

To invest in gold, you can choose from different avenues and gold investment plans as listed below.

• Physical gold investments
• Digital gold
• Gold mutual funds
• Gold exchange-traded funds (ETFs)
• Sovereign gold bonds (SGBs)

Let us discuss each method of investing in gold in a little more detail. 

1. Physical Gold 

Physical gold investments have been the traditional method of investing in gold. Here, you do not need a demat account or any special tools or facilities to invest in gold. You can buy physical gold in the form of jewelry, coins or even bars. 

The advantages of this avenue include easy investing, little to no paperwork and no additional charges except the cost of gold itself. However, on the flip side, physical gold investments are exposed to the risk of theft and have to deal with the cost of storage, if needed.

2. Digital Gold

Digital gold offers an excellent alternative to physical gold investments. Each unit of digital gold is backed by pure 24-karat gold, so you can rest assured that the quality of your investment will not suffer. On the upside, digital gold is a safer way to invest in this precious metal since it is not vulnerable to theft and damage. 

Not sure how to invest in gold digitally? You can simply open an account in any of the many online platforms that make this type of gold investment possible. 

3. Gold Mutual Funds

Gold mutual funds are essentially mutual fund schemes that invest in gold as the primary asset in their portfolios. They may also hold other gold ETFs in their portfolios. The advantage of these funds is that you need not worry about theft or damage to your investments. Additionally, you can invest in gold mutual funds even without a demat account. 

However, you need to take care of the necessary paperwork before investing in gold funds. Furthermore, you may also have to pay the necessary charges to facilitate your gold investments in these schemes. 

4. Gold Exchange-Traded Funds (ETFs)

Gold ETFs are also accessible gold investment plans that you can consider if you want to invest in this precious metal. These are essentially gold funds that can be traded on the exchanges. So, if you are wondering how to invest in gold via ETFs, you need to begin by opening a demat and trading account. 

Investing in gold ETFs involves various charges like brokerage fees and asset management fees. You will also have to handle the initial paperwork required to invest in gold ETFs. On the upside, your gold investments are safe from theft, and you can directly benefit from any price increase in the yellow metal. 

5. Sovereign Gold Bonds (SGBs)

SGBs are debt instruments issued by India’s central bank — the Reserve Bank of India (RBI). In essence, it is also a substitute for holding physical gold. SGBs are issued in tranches and are denominated in grams or kilograms of physical gold. The minimum amount of gold you can purchase via SGBs is one gram, while the maximum amount is four kilograms. You earn interest on the SGB value in addition to the potential value appreciation you may earn from any gold price increases. 

Let us now discuss how to buy gold bonds. In the case of a primary issue, you can purchase gold bonds online through your internet banking portal. Alternatively, you can also buy SGBs through your bank’s mobile application or by visiting a physical bank branch and submitting the application form along with a cheque or DD. This is the summary of how to buy sovereign gold bonds online or offline.

What Documents do you Need to Invest in Gold?

Depending on the volume of your investments and the method of investing you choose, you may have to submit the following documents as a part of your investment application: 

• PAN card (for purchases over Rs. 2 lakhs)
• Aadhaar card 
• Voter’s ID
• Passport

Why Should You Prefer Investing in Gold?

If you are still unsure about the benefits of gold investments, check out the top reasons to invest in gold today. Gold can be a valuable addition to your portfolio because:

• It acts as a hedge against inflation
• It serves as a safe-haven asset
• It helps you diversify your portfolio 
• It has intrinsic value
• It is globally accepted 
• It has a history of successful market performance 

Also Read: Bond Investing Basics: What are Bonds, Their Main Types and Key Terms to Know?

Conclusion

If you decide to invest in gold for any of the above reasons, you can choose from the wide range of options available, like physical or digital gold, SGBs, gold funds and gold ETFs. Now that you know how to buy gold bonds and how to invest in the precious metal through other avenues, you can make an informed choice based on your financial goals, risk preferences and other such parameters.