Thread by @Gravkhatri

Demystifying Gold Investments
In this thread, we are going to talk about gold as an investment option.
We can invest in gold in the following ways:
Physical Gold
Digital Gold
Gold ETFs
Sovereign Gold Bonds(SGBs)
contd..
1/n

Now we'll talk about the pros and cons of each type of investment and then you can decide for yourself.
A).Physical Gold
PROs:
If you ask me there are no pros of physical gold for me. Of course, if you are fond of wearing ornaments then your opinion can differ.
contd..
2/n

CONs:
1.) Physical gold incurs high maintenance and storing charges like locker, making charges, polishing charges, etc.
2.) It doesn't provide you with any cash flow while you own it, you can only earn from capital appreciation.
contd..
3/n

B). Digital Gold
Digital gold can be bought online and is stored in insured vaults by the seller on behalf of the customer. All you require is Internet/mobile banking and you can invest in gold digitally anytime, anywhere.
contd..
4/n

PROs:
1.) You can invest an amount as low as Re.1.
2.) Digital Gold can be used as collateral for online loans.
3.) Digital Gold is genuine and the purity is 24K 99.5% for Safe Gold and 999.9 in the case of MMTC PAMP purchases.
contd..
5/n

4.) Your purchase is stored safely and is also 100% insured.
5.) You can exchange digital gold for physical ornaments or gold coins and bullion.

CONs:
1.) Limit of Rs.2 lakhs for investment on most platforms.
contd..
6/n

2.) Lack of an official government-run regulating body such as RBI or SEBI.
3.) Delivery and making charges are further applied to the price of gold.
In some cases, companies only offer a limited storage period, after which you either have to
contd..
7/n

take physical delivery or sell the gold.

C). Gold ETFs
Gold Exchange Traded Funds (ETFs) are open-ended exchange-traded funds that invest in 99.5% purity gold. Fund managers track prices who trade gold ETF units in the stock exchange.
contd..
8/n

PROs:
1.) Gold ETF are comparatively more liquid
2.) Incur no charges like making/polishing/storage.

CONs:
1.) You will need a Demat account to buy units of gold ETFs. Though I do not feel this is a disadvantage but still for many people opening a Demat account is a
contd..
9/n

cumbersome process.
2.) Gold ETF investors have to pay fund management charges and brokerage at the time of entry and exit from the investment.
3.) It doesn't provide you with any cash flow while you own it, you can only earn from capital appreciation.
contd..
10/n

4.) Gains from the sale of Gold ETF proceeds are subject to capital gains tax at the time of sale.

D). Sovereign Gold Bonds(SGBs)
Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India (RBI) on behalf of the government.
contd..
11/n

These gold bonds are denominated in multiples of 1 gram(s) of gold and are sold to resident individuals, HUFs, Trusts, Universities.

PROs:
1.) These are the best investments if you are willing to make an investment in gold for the long term.
contd..
12/n

2.) SGB investors who hold these bonds till maturity get exemption from capital gains tax.
3.) Perhaps the biggest advantage of SGBs is a fixed internet rate of 2.5% per annum payable semi-annually on the nominal value.
contd..
13/n

4.) Highly safe as these are issued by the govt and very few chances of default.
5.) No brokerage or other charges are levied on investors who opt to invest in SGBs.

CONs:
1.) Low liquidity, You have to hold these bonds for at least 8 years if you do not want to pay
contd..
14/n

any penalties. However, you can sell these bonds in the secondary markets after 5 years.
2.) If SGBs are sold after 3 years but before the maturity then long-term capital gains tax of 20% will be applicable.
contd..
15/n

Overall I believe SGBs are a perfect option to invest in gold if you have an investment horizon of more than 8 years. Feel free to disagree. Thank you for reading.
@FinancialXpress @Investopedia #Gold #Investment
n/n
SOURCES:
financialexpress.com
Investopedia.com

@Unrollme @UnrollThread