Gold Bond Investment in India

07 Oct, 2021

6 min read

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Our families, to date, consider Gold an important asset. But traditions do change and get better with time and now we have Gold Bond investments. Read on to know in detail about investing in Gold Bonds.

Introduction

If there is one asset all Indians seem to be passionate about, it is gold. Gold is highly valued due to its high liquidity and capacity to endure inflation and come out strong. During times of uncertainty and turbulence in the markets, the prices of gold are known to soar. Owing to these very features, gold investments are largely viewed in a favourable light.

Read on to understand more about gold investments. 

Merits Associated with Investing in Gold

Investors that are most wary of risks, tend to prioritize safety, a high level of liquidity and generous returns on their investments. Although gold is able to meet the requirements of the first two categories, it doesn’t fare too badly in the final category either.

The following reasons make gold investments viable bets.

  • Owing to its ability to withstand inflation with success, gold is worth investing in. Over the course of time, the returns drawn from gold investments have been in sync with the rates of inflation.
  • Gold is inversely related to equity investments. This means that if equity markets begin to fall, the value of gold and its investments begin to rise. By investing in gold your portfolio has a buffer that is able to better withstand the general volatility your portfolio might experience.

Today, gold need not be invested in the physical form which is not only tedious to safeguard but doesn’t add to additional wealth. Instead, paper forms of gold can be invested in. These include gold exchange-traded funds and sovereign gold bonds.

While gold funds imply investments directed towards gold mining companies, gold exchange-traded funds function similarly to investments made in physical gold without the issues associated with storage of the same. They are held in the form of depository or Demat holdings.

Physical Holdings of Gold Gold Exchange Traded Funds Gold Funds
Here, you invest in physical gold. You purchase a proportionate value of gold in the form of a paper holding Bullion investments are favoured along with companies that mine gold are invested in.
You aren’t required to possess a Demat account. You have to possess a Demat account to invest in gold ETFs. You aren’t required to possess a Demat account.
Market fluctuations impact gold prices directly. Variations in the price of gold affect gold ETFs. Variations in gold prices don’t impact gold funds directly.
You don’t incur charges other than the price you paid for the physical gold itself. You must pay asset management and brokerage fees. A minimum charge must be paid to manage gold funds.
Storing physical gold brings with it risks associated with burglary and theft. You aren’t burdened with having to trade gold in its physical form. You don’t need to worry about risks associated with theft and burglary.
You aren’t required to fill out any paperwork to buy gold. You need to fill out paperwork to invest in gold ETFs. You need to fill out paperwork to invest in gold funds.
Systematic investment plans (or SIPs) aren’t available here. SIPs aren’t available here. SIPs are available here.
Conventional investors might enjoy this investment best. Investors possessing the skills and time are most likely to benefit from such investments. Investors willing to take calculated risks to incur high returns will potentially benefit the most here.

Understanding Gold Funds

Gold fund investments entitle investors to invest in stocks of companies that deal with gold and gold-related activities.

Gold mutual funds cover metals apart from gold, including but not limited to silver and platinum.

A mutual fund manager brought on by an asset management company is responsible for managing a gold fund, which differs from gold ETFs. These managers employ fundamental trading analysis to buy and sell stocks to maximize the returns their investors accrue. Up to a certain extent, market conditions impact the returns drawn on gold funds.

Gold mutual funds remove the risks associated with returns to a significant extent. This is because they distribute investments across a wide array of investment options, meaning that mutual funds operate keeping in mind diversity goals.  Investors must always understand what their capacity for risk is and what their financial goals are before choosing a gold fund.

Conclusion

To learn more about gold investments, understand your investment profile and more, visit Angel One’s Smart Money portal.

Frequently Asked Questions

Q1. What does ETF stand for?
A1. ETF is the acronym used to refer to an exchange-traded fund.

Q2. What form of gold investment offers systematic investment plans?
A2. Gold funds offer systematic investment plans, unlike physical gold and gold ETF investments.

Q3. Does possession of physical gold require the possession of a Demat account?
A3. No, you aren’t required to possess a Demat account just because you own physical gold. A Demat account is required if you would like to own gold exchange-traded funds.

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