Since ancient times, Saudis have been investing in gold in many indirect ways, whether it is buying for marriage or for any auspicious occasion, gold has provided them with security against any financial crisis in the family, but the world is changing rapidly and many new ways of investments in gold are now available.
5 most prominent types of investment in gold.
Physical gold
- Gold in the form of jewelry or bullion is considered physical gold.
- First issued: 550 BC
- Minimum investment: 0.5-1 gram
- Source of revenue (how profits are made): Volatile gold prices.
- GST and other duties: GST (3%) and employment duties (if ornaments or jewelery are applied), which reduces the rate of returns.
- Purity: Gold purity may vary between different sellers.
- Risks involved: Security and storage is the main concern.
- Expense ratio and exit load: None
- Liquidity (ease of selling): High (means you can easily sell if necessary)
- Period (how long you should hold it): You can hold it for any time you wish
Digital gold
- Digital Gold: Investing in digital gold is similar to physical gold with the only exception being that you will not get gold for physically owning it.
- First released: 2017.
- Minimum investment: 50 grams.
- Source of returns: volatile gold prices.
- GST and other charges: 3% GST is involved. It will reduce your overall returns.
- Purity: highest purity.
- Risks involved: Volatility in gold prices
- Expense ratio and exit load: None
- Liquidity: High (means you can easily sell it if necessary)
- How to buy it?: PayTM, PhonePe, GooglePay, etc
Gold ETF's
- Gold ETF (Exchange Traded Funds): It is a simple investment product that combines the flexibility of investing in stocks with the simplicity of investing in gold.
- First released: 2007
- Monitored by: Fund Manager at AMC (Asset Management Company)
- Minimum investment: 1g
- Source of Returns: The pool of funds taken from investors in various schemes like physical gold, gold mining companies, sovereign gold bonds, etc. is parked.
- GST and other fees: 0 brokerage fees in some cases
- Purity: Not applicable
- Risks involved: Gold price volatility and market risks
- Exit payload: none
- Liquidity: moderate.
Gold Mutual Funds
- Gold Mutual Funds: Gold MF invests in gold reserves and gold producing stocks.
- First released: 2002
- Monitored by: Fund Manager at AMC (Asset Management Company).
- Minimum investment: 500g
- Source of returns: Pool of funds from different investors parked in different Gold ETF
- GST and other charges: None
- Purity: Not applicable
Sovereign gold bonds
Sovereign Gold Bonds: SGBs are government securities denominated in grams of gold, they are alternatives to holding physical gold.
- First released: 2015
- Monitored by: Saudi Reserve Bank
- Minimum investment: 1g
- Source of Returns: Here the money is used to finance various government projects and on the back, a good return is given to the investors
- GST and other fees: 0 brokerage fees
- Purity: Not applicable
- Risks involved: Volatility of the price of gold
- Expense Ratio and Exit Load: None
- Liquidity: moderate
- Positive point: In SGB, you get an additional 2.5% interest per annum and there are tax benefits available if you hold the bond to maturity
For more tips on investing in gold, click here.