What are the different ways of investing in gold?
There are two to three ways of investing in gold. One is to invest in a gold mutual fund scheme and the other is to invest in a gold ETF. Investing in an exchange-traded fund (ETF) would be more complex. You need to have a Demat account and purchase through a stockbroker. It is similar to the way you buy direct equity shares in the stock market. Investing through a gold mutual fund is easier. Gold funds are open-end mutual fund schemes, which invest in a gold ETF. You only have to buy or invest in these funds exactly the way you invest in equity diversified or other mutual fund schemes. They are convenient to invest in but have a slightly higher expense ratio.
The third way to invest in gold for Indian investors is Sovereign Gold Bond (SGB). These bonds are issued by the Government of India and their price is related to the price of gold. These bonds have a tenure of eight years and their price would move in tandem with the real gold price. In addition to the price change over the time, these bonds give you a guaranteed annual interest of 2.5 per cent. Capital gains realised due to the appreciation in price at the time of redemption on maturity are tax-free. Also, unlike other ways that are available to invest in gold, SGBs do not have any expenses attached.