For centuries, gold was considered a storehouse of value. While physical gold still retains its allure for jewelry-loving Indians, gold is also a favorite with retail investors, often as a hedge against inflation. There are numerous ways one can invest in gold. For example, one can buy gold in the form of coins, bars or jewellery, gold exchange-traded funds, sovereign fund schemes, and gold mutual funds. You might be wondering how to invest in gold, or what is the gold investment plan. Keep reading to know more. This blog post will discuss everything you need to know about investing in gold, including types of gold investment plans, the best gold investment funds in India, documents required for investing in gold, and why you should opt for gold investment.
How to invest in gold: Gold investment plans
Before we discuss some of the best gold investment plans, we will discuss how to invest in gold in detail. Because learning to invest in gold is essential before you actually participate in it. There are several ways you can invest in gold—conventional and modern.
In conventional mode, you can buy jewelry, coins, or gold bars. In a fast-evolving market, you have the option to invest in gold exchange-traded funds (ETFs) that track the price of gold and gold funds.
Gold ETFs are somewhat similar to the physical possession of gold and offer similar benefits. However, as they don’t require physical possession, investors are free from the hassle of storing gold and don’t have to incur maintenance costs. Gold is stored safely in demat or paper format. Also, gold funds directly invest in gold-related companies instead of purchasing physical gold.
There are several options to consider if you are looking for the best gold investment plan, such as physical gold, gold ETFs, gold funds, sovereign gold bonds, and digital gold. However, if you want to know the best way to invest in gold, you should understand the difference between each scheme. We have compiled a table that lists out the differences between major gold investment options.
| Aspects | Physical Gold | Gold Funds | Gold ETFs |
| Type of possession | One has to purchase jewelry or gold bars | Mutual funds that invests in gold ETFs or stocks of gold-related firms | Invest by buying proportionate value of gold but no need to physically own it. |
| Charges and fees | Charges for storing gold in bank vaults | A minimum charge is applied here for managing the gold funds | Gold ETF investment involves brokerage and asset management fees |
| Demat account | No need for any demat account for this investment | No demat account is needed for gold funds | One must have a demat account to invest in gold ETFs |
| Risk factors | Risk of theft. Requires safe storage in the bank or at home. | No risk of theft or burglary involved | No risk of theft or burglary involved |
| Gold price impact | Swings in global gold prices can impact local prices | Market risk such as shifts in supply and demand of gold, state of economy | Gold price directly influences gold ETFs |
| Paperwork | No paperwork required | No paperwork if you opt for online investing | Can invest with or without paperwork |
What are Sovereign Gold Bonds?
Choosing gold as an investment can be rewarding. Sovereign gold bonds are one of the safest and best ways to invest in gold digitally. It is because sovereign gold bonds are issued by the Reserve Bank of India with an assured interest rate of 2.50% per annum on behalf of the Government of India. The denomination of bonds in units is 1 gram.
One can invest in these sovereign gold bonds up to a maximum of 4 kg. These gold bonds have a tenure of 8 years, with an exit option available from the fifth year onwards. With sovereign gold bonds, you can have ownership of gold without getting physical possession of gold. Therefore, it is considered one of the most hassle-free methods to invest in gold.
Some gold funds in India
Gold as an investment can offer a number of benefits. We have already discussed different types of gold investment plans in India. Here are some gold investment funds in India that investors can consider.
1. ICICI Prudential Gold Fund
ICICI Prudential Gold Fund is considered the best option for gold funds in India. To offer high returns, this gold mutual fund closely tracks the price of real gold.
2. Axis Gold Exchange Traded Fund
If you want to invest in gold online, Axis Gold Exchange Traded Fund could be the best option for you. Another plus point of Axis Gold Fund is that it also aims to provide returns that resemble real gold investment by closely tracking the price of gold.
3. Aditya Birla Sun Life Gold Fund
Aditya Birla Sun Life Gold Fund is another good option for people interested in gold investment in India. Returns are offered by closely tracking gold price performance in the market.
4. SBI Gold Fund
SBI Gold Fund offers versatility in gold investment. With the SBI Gold fund, one can also invest in assets that are related to gold research businesses and gold mining. This fund offers a wide range of options for investment.
5. HDFC Gold Fund
One of the best gold investment plans in India is the HDFC Gold Fund. It is a popular choice for investors interested in gold mutual funds. It is an open-ended fund that focuses on generating returns that closely match the returns of real gold investment.
6. Nippon India Gold Savings Fund
Nippon India Gold Savings Fund helps investors benefit from the price movements of real gold in the market. It offers returns based on the tracking the price changes of real gold.
7. Kotak Gold Fund
Kotak Gold Fund is a popular choice among gold investors in India.
What documents do you need to invest in gold?
We have discussed how to invest in gold and in this section, we will provide you information about the documents required for gold investment in India. If you want to invest in physical or real gold, you will be required to furnish documents such as a PAN card and Aadhaar Card. On the other hand, investing in gold ETFs is not that straightforward. First, you must open an account with a gold fund brokerage firm and open a DEMAT account with the help of the same brokerage firm.
The required documents for investing in Sovereign Gold Bonds are similar to those of the physical gold i.e. PAN card, Passport, Aadhaar Card, Voter ID etc.
Why should you prefer investing in gold?
Profitable returns, liquidity, and safety are the three primary criteria for making traditional investments and all of these can be realized with gold investment. The perspective on gold investment varies across investors. Some investors think gold returns are volatile in nature. However, many think that gold investment is a safer option during uncertain market conditions.
Experts also consider gold investment as an inflation-beating investment as investment return on gold is typically higher than inflation rate. Therefore, a rise in inflation rate cannot create much impact on real gold or gold products and assets. Another major reason to invest in physical gold or gold assets is liquidity. Gold funds in India offer impressive liquidity and returns. However, one must choose the best gold investment fund to get higher returns.
Conclusion
Every investment option, be it stock, forex, land, or gold has its pros and cons. However, due to higher liquidity and inflation-hedge quality, gold has been always a popular choice for investment in India. If you are interested in gold investment, you can always opt for buying gold physically. But if you are worried about storage and attendant risks, you can consider gold funds, gold ETFs, or sovereign gold bonds that offer the same benefits as investing in physical gold. We have discussed everything you need to know about gold investment including how to invest in gold, best gold investment plans, and more.
