Thread by @ambrulz

Let's dive today into #GOLD - Options and Strategies for Your Portfolio
As we age, portfolios benefit from stability. Gold brings that, reducing the need for high-risk assets like equities. It's all about balance as your financial goals evolve. ⚖️1/n

So, how should you buy gold? Physical, Exchange Traded Funds, digital, or mutual funds? Each option has unique advantages. Let’s break down each type and find what fits best for you. 2/n

1. Digital Gold: Offered by platforms like Augmont, MMTC-PAMP, and SafeGold via partners like Paytm. It’s a ledger-based purchase—easy to buy/sell via the app, with low minimums. 📱💳 3/n

3. Physical Gold: This includes coins, bars, and jewellery, available at jewellers and some banks. Great for those who want a tangible asset but consider security and making charges. 💍🏦 4/n

Gold Mutual Funds: These funds invest in gold-related assets like ETFs. They’re managed by AMCs, making investing via SIP or lump sums easy. 🤝💼 5/n

In terms of convenience, digital gold and ETFs are the easiest to buy online. Physical gold requires visiting a jeweller or bank, and mutual funds can be bought through AMC partners. 🖥️🏠 6/n

Minimum investment: Digital gold has no barriers; you can buy as little as ₹10 worth! ETFs require one unit’s worth (e.g., ₹65 for Nippon Gold BeES). Physical gold’s entry point is a bit higher, around ₹4,000 - 8000. 💵 7/n

Liquidity: Digital gold and ETFs are highly liquid. However, ETFs are exchange-traded, offering high flexibility with minimal slippage. Just be cautious of low-volume ETFs! some time 📊💧
Bonus tip: always use limit orders if you are purchasing a large quantity 8/n

Physical gold’s liquidity varies. It's best to sell to the same vendor you bought it from. Some brands like MMTC-PAMP even offer gold buyback centres for transparent transactions. 🛠️💰 9/n

For costs: Digital gold has a 3% GST and storage fees. ETFs have a 0.6-1% expense ratio. Physical gold includes GST, plus making charges for jewellery. Gold mutual funds also carry expense ratios of 0.6-1%. 💸10/n

Conversion to Physical: Digital gold is convertible, as is ETF (if you own a significant amount). Physical gold is already in tangible form, while mutual funds don’t allow conversion to physical gold. 🔄 11/n

Regulation: Gold ETFs and mutual funds are SEBI-regulated, adding a layer of safety. Digital gold, however, is unregulated, so be cautious. Physical gold is governed only by hallmarking standards. 12/n

Taxation: Gold ETFs have a 12-month holding for LTCG, while digital gold, physical gold, and mutual funds need a 24-month holding period for the long-term capital gains rate. 13/n

Pros & Cons of Each Type
Digital Gold: Ultra-convenient and low-cost, but lacks regulation and has storage fees.
Gold ETFs: High liquidity, SEBI-regulated, no physical risk, but requires a Demat account and large holdings to convert to physical gold 14/n

Physical Gold: Tangible and timeless, with no counterparty risk, but comes with high-security costs and potential making charges.
Gold Mutual Funds: Professionally managed, SIP-friendly, SEBI-regulated, but no physical conversion option and slower redemption time. 15/n

you might have noticed that I have not covered SGBs because GOI realized this is the loss-making bet for them & no new series are launching, however, you can buy existing series by comparing spot price and interest rates whether they are fairly valued at the current price 16/n

Most of the SGB series are overpriced now, but they do have the advantage of a tax-free if you hold until maturity so consider all this while doing analysis, most of the volumes are shifting back towards ETFs, mutual funds physical gold because there are no new new SGB's 17/n

As an allocation rule: Allocate 20% of your overall portfolio into Gold and don't look at gold for return but rather as a hedge for your portfolio. This rule isn't one-size-fits-all but gives a solid starting point!
18/n

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