You can buy gold in 4 ways: Physical, ETFs & Mutual Funds, Digital Gold and Sovereign Gold Bonds (SGB). But which option is the best?
Based on the cost of investing, risk & returns, you can determine which option is best for investment. Let’s look at each factor in detail.
Physical Gold: Making charges, GST, and storage/bank locker charges. Digital gold: GST and Spread - the difference between buying and selling price.
Gold ETF: Expense ratio, demat account charges, and brokerage. Gold Fund Expense ratio, demat account charges, and brokerage. SGB: No cost (investor earns 2.5% interest).
Due to the various costs involved all forms of gold except SBG give lower returns. But, apart from zero cost, SGB also earns interest. Winner: SGB
ETFs, Gold Funds, and SGBs are the least risky compared to other options. Physical gold is prone to theft and purity issues, while digital gold has no regulator. Winners: SGB, Gold Funds & ETFs
Go for fresh issues of SGBs, if available. If RBI has no ongoing SGB issue, you can consider gold funds. Try to avoid other options due to liquidity issues.