People who would like to invest in gold merely for a purpose of investing now have another option available to them in the form of digital gold. Purchasing digital gold is becoming increasingly appealing to investors who wish to park their assets for a short period of time because it is generally stable and has the potential to produce a passive income.
1) Sovereign Gold Bonds (SGBs)
RBI issues government-backed sovereign gold bonds.
2015’s Gold Monetization Scheme launched these bonds. RBI issues these bonds in tranches all year. Each bond equals 1 gramme of gold, allowing investors to invest online. In addition to variations in gold pricing, these bonds have a 2.5 percent semi-annual interest rate paid by the RBI. Government-backed SGBs are stable. The RBI allows redemption of these bonds after five years.
Bonds are traded on stock exchanges, providing liquidity.
Per year, individuals can import 4 kilogramme and HUFs 20 kg.
SGB investments offer:
Demat bonds eliminate the risk of losing them. Physical gold storage risk is eliminated, and investors earn interest on gold that would have been in lockers.
If the bond is kept to maturity, the investor is exempt from capital gains tax.
SGBs are easily loanable to investors. Even after accepting a loan, the investor gets SGB interest, reducing the effective loan rate. SGB can be gifted or transferred. The RBI maintains introducing fresh tranches throughout the year, however if you want to buy SGBs, you should buy them from stock exchanges because of poor liquidity in the segment.
Investors could also consider buying units of the tranche that was issued at a higher rate and is currently trading at a discount, as interest is computed on the issue price. Increasing investor interest rates.
2) Gold ETFs
Gold exchange traded funds (ETFs) are essentially the same thing as a mutual fund, with the exception that their units can be purchased on stock exchanges. There are several different asset management firms (AMCs) that each have their own own gold exchange-traded fund (ETF), some of which are SBI Gold ETF, AXIS Gold ETF, and Nippon Gold ETF.
Gold can be purchased in smaller quantities through the use of exchange-traded funds (ETFs). Investors who would like to acquire gold in tiny quantities and store it in the demat format will find these to be the most suitable options.
These AMCs put the money into gold that has a purity of 99.5 percent, making it a secure investment. This is a suitable alternative for investors with limited capital, such as students, who prefer to have some of their holdings in gold allocated to gold.
Advantages Of Putting Money Into Gold Exchange-Traded Funds
There is a guarantee that the purity of the gold is at least 99.5 percent.
Because SEBI oversees the regulation of the mutual fund business, concerns about investors’ safety and security are significantly reduced.
These funds have very reasonable expense ratios, such as the Nippon Gold ETF, which has an expected cost of only 0.39 percent, making it a relatively inexpensive investment option. Loans secured by these exchange-traded funds (ETFs) are readily available from a number of different financial institutions to investors who wish to do so.