Gold has long been a prized asset globally, sought after by central banks, institutional investors, and individuals alike. For decades, India has been one of the largest consumers of gold, and the yellow metal plays a significant role in the country’s culture. Through centuries, Indians have shown a deep appreciation for gold, especially during traditional and auspicious occasions like Dhanteras and Akshaya Tritiya, which have become synonymous with gold investments.
With the festive season upon us, it’s time for celebration and joy. With gold prices touching an all-time high of Rs 80,000 for 10 gms, The All India Gem and Jewellery Domestic Council (GJC) predicts a 30 percent surge in retail sales this festive season.
Many people love investing in physical gold due to tradition or custom, but often overlook the fact that additional costs, like making charges, can be 15-20% higher on average. Moreover, after factoring in GST, concerns about purity and storage come into play. Physical gold—whether in the form of bullion, bars, coins, or jewellery—derives its value from the actual gold content, but these considerations can make it less cost-effective.
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With the introduction of more convenient options, now is a great time to uphold tradition while also making smart, future-focused investments. Here are some smarter, cost-efficient alternatives to consider:
Sovereign Gold Bonds (SGBs) offer the security of government backing along with interest payments and tax benefits if held to maturity. However, they come with a fixed maturity period, and gold prices can fluctuate during this time.
Gold Exchange-Traded Funds (ETFs) are traded on stock exchanges, making them liquid and offering diversification benefits. They have low expense ratios but are subject to market fluctuations.
Gold Savings Funds invest in gold-related securities, providing diversification and professional management. These funds may have minimum investment requirements and offer the convenience of investing through lump sum or systematic investment plans (SIPs), allowing investors to save and accumulate gold over time.
Gold Savings Schemes offered by jewellers are often seen as easy and convenient, with attractive discounts on jewellery purchases (e.g., through reduced making charges). However, they tend to come with higher charges and offer less flexibility compared to other options.
Choosing the Right Gold Investment Option
The best gold investment option for you depends on your financial goals, risk tolerance, and investment horizon. Consider the following factors:
- Need: If you’re buying jewellery for a festive occasion, keep in mind that it’s more of a consumption item than an investment—although it may eventually serve as one.
- Objective: If your goal is purely investment or portfolio diversification, gold ETFs and Gold Savings Funds are the most attractive options.
- Hedge: Gold is well-known as an effective hedge against inflation and uncertainties, including unforeseen global events. It remains one of the most sought-after assets for inflation protection.
- Tax Implications: Consider the tax treatment of different gold investment options. SGBs are tax-free if held to maturity, while gold ETFs and funds are taxed differently but offer more flexibility.
Ultimately, the key to successful gold investing is aligning your choice with your financial goals and risk appetite. Understand the risks and rewards of each option and choose the one that best suits your personal and family financial plans. While the festive season is a time for celebration, it also presents a golden opportunity for smart investing. By incorporating investment into your festive plans, you can enjoy the joy of the season while building wealth for the future.
So, as you light diyas and exchange gifts, don’t forget to invest a little something for yourself.
(By Santosh Joseph, CEO, Germinate Investor Services)
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