Physical Gold vs Gold ETFs VS Gold Mutual Funds: Which Gold Investment Can Give You the Best Returns?

Gold Investment: Gold is a traditional investment in India. Gold rate from Rs 3,000 per gram in 2013 has now increased to Rs 7,000 per gram. This means that the price of gold has increased by almost 230% over the last 10 years. When you see the number of 200%, it looks very attractive. But did you know that the real value of the gold you have is Rs. 7000 per gram but it is 25% to 30% less than its market value.

You can know the real value of the gold you have, when you try to sell it in the market. Jewelers cut 25 to 35% of the making charges when you sell in the market. Apart from this you have to pay GST and others while buying and selling gold.

But now there are better ways available in the market, where you don't need to buy actual gold but still you can invest in gold. Investing in digital gold, gold bonds, gold mutual funds, gold ETFs can save you 25% to 30% in making charges. This will also reduce the risk of theft and other costs like bank locker charges.

Let's take a look at Digital Bonds VS Gold ETFs VS Gold Mutual Funds one by one

Digital Gold Bond : Advantages and Disadvantages

You can buy digital gold from the comfort of your home by visiting any mutual fund app. It is worth as much as gold in the market. You can buy gold from as low as Rs. This gold is 99% pure. For example, if you buy gold worth Rs 10000, the company you are buying gold from buys that amount of gold and keeps it in a locker. And for this they do not charge any making charges from you. But you have to pay 3% GST which you otherwise pay even when buying physical gold.

How to buy or sell digital gold?

You can sell this gold whenever you want and save 25% to 30% on making charges. You only need to pay storage charges and selling charges to the company. Which can be 3% to 6%. There is no risk of theft or keeping gold in a locker.

But if you don't want to sell this gold but want physical delivery of the gold then you have to pay the transportation cost for it. Also you have to pay making charge for physical delivery. But the making charges for digital gold are less than conventional jewellers.

If you sell digital gold within 3 years then you have to pay STCG tax and if you sell after 3 years then you have to pay LTCG tax. Also note that this gold is not allowed to be bought and kept permanently, sometimes it has to be sold or called home.

Gold Mutual Fund: Advantages and Disadvantages

You can buy gold mutual funds online or on any mutual fund app. Just like you start a SIP for any mutual fund, you can start a gold mutual fund SIP at Rs. Can start from 500. You can pay this amount every month or every 3,6 months or pay some amount once (Lumsump) as you want.

Mutual fund companies invest this money in gold ETFs. When the price of gold rises and falls according to the market price of gold, the value of your money increases.

If you want to buy a certain amount of gold, you can use this money to make jewellery. The market price of gold mutual fund increases in proportion to the value of gold. So while investing in gold mutual funds, investors are advised to check the AUM for these funds and take their decision.

While withdrawing gold mutual funds, an exit load charge has to be paid. But these charges are very less compared to the making charges. A fee of 1.5% of the cost will be charged. Also if you sell within 3 years then you have to pay STCG TAX. Another thing is that you cannot take gold loans on these funds nor can you take physical gold delivery. You have to withdraw money from gold mutual fund as per your requirement and it also depends on the terms and conditions of the mutual fund you are buying.

Gold ETF Bonds: Advantages and Disadvantages

Gold ETF bonds are invested directly in gold itself or by companies in gold-related investments such as gold mines or gold-related companies. When the price of gold increases, so does the money in this fund. But here, if you want, you can actually take physical delivery of gold up to 1KG. Gold here is considered to be 99% pure.

Gold can be bought here only in 1 gm, 2 gm. Here you don't have the option of SIP or Lump Sum like Gold Mutual Fund. Also, if you want to invest here, you need to open a DEMAT account and invest money from it.

You will get the same benefits like you will not have to pay making charges. While selling gold, here too like gold mutual funds, 1% expense ratio has to be paid. Similarly STCG tax is payable on sale within 3 years and LTCG tax after 3 years. Gold loan cannot be taken on this bond either.

(Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)