Introduction
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In this article, we will study gold investment comparison with all its types along with returns so that you can easily decide on gold investment.
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Physical gold vs Digital vs Gold ETFs vs Gold MF vs SGB
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| What is ? Physical gold-Coins/Biscuits It is often bought in the form of jewellery, biscuits and gold coins. Digital gold Digital gold is a convenient and cost-effective way to accumulate the Gold metal for those who prefer it in physical form like coin and jewellery. Digital gold enables you to purchase, sell and accumulate pure gold in fractions of gms anytime and anywhere. Gold ETF Gold ETFs are listed & traded on the NSE-National Stock Exchange of India and BSE-Bombay Stock Exchange Ltd. like a stock of any other company. ETFs are suitable for investors who like to diversify their portfolio with exposure to the gold market. Gold Mutual fund Gold Mutual Funds are pooled investments managed by Mutual Fund Houses and are designed to help investors to invest in gold electronically. These funds invest in a Gold ETF floated by the Asset Management Company.. Sovereign Gold Bond Scheme Sovereign gold bond issued by the government of india is one of the ways to own gold in paper form. The SGB scheme, issued by the Reserve Bank of India on behalf of Government of India that allows you to enjoy the advantages of investing in physical gold along with additional assured returns. |
| Initial amount Physical gold-Coins/Biscuits Coins are available in denominations of 5 & 10 grams and the bars will be for 20 grams. Digital gold Minimum value to buy gold starts from Rs 1. Gold ETF Initial investment limit in gold ETF is 1 unit which is equivalent to 1g of gold. Gold Mutual fund SIP can start with min investment of Rs. 500. Sovereign Gold Bond Scheme Minimum initial investment is 1 gram of gold. |
| How to invest ? Physical gold-Coins/Biscuits Coins and bars can be purchased from jewellers, Banks, NBFC, MMTC outlet and now a days even e-commerce website also sell gold coins and bars from authenticated MMTC seller. Digital gold Gpay, Phonepe, Paytm etc. Gold ETF Demat account. Gold Mutual fund Mutual funds app. Direct Mutual Fund through the Asset Management company website. Sovereign Gold Bond Scheme Banks, Post office, Stock holding corporation of india, Demat account. |
| How much ? Physical gold-Coins/Biscuits No Limit It is advisable to stay the documentation proof if you buy or received from an inheritance source like Will or written documentation proof. However, your ITR should correspond to the quantity of holding. Digital gold Paytm - Maxmiam limit is 1.5L. Stock Holding Corporation - No limit (If purchase amount exceeds Rs 50,000, then PAN card copy will be required ). PhonePe - 60 grams. Gold ETF No limit Gold Mutual fund No limit Sovereign Gold Bond Scheme Maximum 4 KG for an individual as per rules for SGB 2020-21. |
| Long-Term Capital Gains Tax Physical gold-Coins/Biscuits LTCG applicable after 3 years Digital gold LTCG applicable after 3 years Gold ETF LTCG applicable after 3 years Gold Mutual fund LTCG applicable after 3 years Sovereign Gold Bond Scheme LTCG applicable after 3 years. (No capital gain tax if held till maturity). |
| Systematic Investment Plan Physical gold-Coins/Biscuits Not Applicable Digital gold Available Gold ETF Not Applicable Gold Mutual fund Available Sovereign Gold Bond Scheme Not Applicable |
| Safety and Security factor Physical gold-Coins/Biscuits Low - Due to higher risk of theft and cheating Digital gold High- Due to low risk of theft and cheating Gold ETF High- Due to low risk of theft and cheating Gold Mutual fund High- Due to low risk of theft and cheating Sovereign Gold Bond Scheme High- Due to low risk of theft and cheating |
| Trading factor Physical gold-Coins/Biscuits Not Applicable Digital gold Not Applicable Gold ETF You should have knowledge of market for ETFs funds & trading. Gold Mutual fund Not Applicable Sovereign Gold Bond Scheme Not Applicable |
| Liquidity (Liquidity is the ability to convert an asset into cash easily) Physical gold-Coins/Biscuits High* *Risk of theft and cheating in this process. Digital gold High Gold ETF Moderate* *Tradable on the exchange Gold Mutual fund High Sovereign Gold Bond Scheme Moderate* *Tradable on the exchange Investor can sell it on the stock exchange if they need the funds before its 5 year maturity |
| Delivery Physical gold-Coins/Biscuits Yes Digital gold Minimum .5-1 gram Gold ETF Minimum 1 Kg Gold Mutual fund No Sovereign Gold Bond Scheme No |
| Loan facility Physical gold-Coins/Biscuits Available but it's applicable on less than 50 gram coins as per RBI guideline Digital gold No Gold ETF No Gold Mutual fund No Sovereign Gold Bond Scheme Available- SGB certification is eligible to be used as collateral for loans from banks, financial Institutions. |
| Lock in period Physical gold-Coins/Biscuits No Digital gold No Gold ETF No Gold Mutual fund No Sovereign Gold Bond Scheme 5 Year |
| Storage cost Physical gold-Coins/Biscuits High (Bank locker cost) Digital gold Low Gold ETF Low (Security charges on Demat account) Gold Mutual fund Low Sovereign Gold Bond Scheme Very Low |
| Purity of Gold Physical gold-Coins/Biscuits Purity check needed Digital gold High- Due to digital form Gold ETF High- Due to electronic form Gold Mutual fund High- Due to electronic form Sovereign Gold Bond Scheme High- Due to electronic form. |
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Returns comparison
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| Goods and Services Tax Physical gold-Coins/Biscuits 3%* *depending on Government of India Digital gold 3%* *depending on Government of India Gold ETF NA Gold Mutual fund NA Sovereign Gold Bond Scheme NA |
| Storage,Transition & Delivery charges Physical gold-Coins/Biscuits NA Digital gold approx. 1.5% - Delivery charges applicable Gold ETF NA Gold Mutual fund NA Sovereign Gold Bond Scheme NA |
| Exit Load Physical gold-Coins/Biscuits NA Digital gold NA Gold ETF NA Gold Mutual fund 1% exit load applicable in case of redemption before 1 year. Sovereign Gold Bond Scheme NA |
| Brokerage/Government charges Physical gold-Coins/Biscuits NA Digital gold NA Gold ETF 0.1-0.5% + Brokerage charge. Gold Mutual fund 0% - in case of Direct Mutual fund Sovereign Gold Bond Scheme 0% |
| Expense Ratio Physical gold-Coins/Biscuits NA Digital gold NA Gold ETF ETF charge : 0.5-1% per year Gold Mutual fund Management Fee : 0.5-1% per year + ETF charge : 0.5-1% per year Sovereign Gold Bond Scheme NA |
| Extra Interest Physical gold-Coins/Biscuits NA Digital gold NA Gold ETF NA Gold Mutual fund NA Sovereign Gold Bond Scheme 2.5% per year |
| Approximate returns in 5 year Physical gold-Coins/Biscuits 45% Digital gold 45% Gold ETF 45% Gold Mutual fund 45% Sovereign Gold Bond Scheme 45% |
| Actual return on gold Physical gold-Coins/Biscuits 45-3 = 42%* *We have not considered storage charges. Digital gold 45-(3+1.5)= 40.5% Gold ETF 45-5=40%* *We have not considered brokerage charges. Gold Mutual fund 35%* *If you don't exist before 1 Year. Sovereign Gold Bond Scheme 45 + (2.5*5) = 57.5% |
Gold comparison with Silver
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| Liquidity In terms of liquidity, gold is more easily sold off than silver. Without compromising on the shifting rate of commodity gold stays at a higher place than silver when required to sell-off. |
| Storage Silver requires up to 100 times more storage space than gold, is more high-priced to store, and could tarnish over the years. |
| Affordability Silver is more affordable than gold, with the same benefits. Allows sellers to meet small financial desires in the future. Less expensive for gifting. |
| Volatility Gold is less volatile than silver. |
| Related Links | |
| What is the difference between Bond and Equity? | NPS vs PPF: NPS vs APY |
| What is the difference between Bond and Debenture? | SGB vs FD |
| RBI Bonds vs Tax Saving Fixed Deposits vs SGBs |
Gold comparison with Platinum
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| Durability Platinum Extra long-lasting than gold Gold Durable enough for regular wear |
| Maintenance Platinum Required to be re-polished and re-plated more regularly than gold. Gold Require less maintenance for gold holding as it loses its luster after many years as compared to platinum. |
| Price Platinum approx. 50% highly-priced than gold as platinum is more dense than gold so need to invest more in platinum to make the same weight item. Gold More affordable as compared to platinum. |
Conclusion of Gold investment comparison
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After having compared all forms of gold, we would like to suggest that in the current market scenario if one planning to buy gold can park their funds in the sovereign gold bonds as per apart from a price hike in gold and it gives an additional return of 2.5% and one can feel stress-free after investing in SGB as no storage or issue of theft is there.
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