Wednesday, the 18th of April, is celebrated across India as Akshaya Tritiya and is considered to be an auspicious day for new beginnings.
Over the last few decades, Akshaya Tritiya has also been advertised as an excellent day to buy gold, and jewellers across the country cry themselves hoarse claiming that their stores have the best offers. Indian women have always leaned towards gold as an investment because of its cultural value, but the fact is that jewellery is not an ‘investment’ and it never will be. However, it is possible to invest in gold this Akshaya Tritiya without buying jewellery. Here are three ways in which you can do so.
Gold Sovereign Bonds
Gold Sovereign Bonds are government issued financial instruments in which the underlying asset is gold. So essentially, you will own a certain weight of gold in paper form. The cost of the bond will depend on the price of gold at the time of issue. Gold Sovereign Bonds are the best way to invest in gold because these bonds, apart from being government issued, also offer an interest of 2.5% per annum on your investment. So, unlike physical gold which will sit idle in your bank locker, these bonds will earn you an income.
The 2018-19 Series of Gold Bonds are currently open for subscription at an issue price of Rs. 3,114/- per gram and if you purchase them online through your banker, you will receive a discount of Rs. 50/- per gram. You can buy bonds from a minimum of 1 gram to a maximum of 4000 grams (or 4kg). You can read more about how these bonds work (including their taxability), in my previous column on Gold Sovereign Bonds.
Gold Exchange Traded Fund
An exchange traded fund is a financial instrument that is created to track a specific commodity or index. A Gold Exchange Traded Fund, therefore, tracks the price of gold in India. These funds are traded in the market, much like shares or Mutual Funds and can be purchased in ‘units’.
Plenty of Asset Management Companies like Kotak and Birla Sun Life, which own Mutual Funds also issue Gold ETFs. A single unit of a Gold Exchange Traded Fund usually represents 1 gram. Unlike the Gold Sovereign Bonds, there is no maximum limit on purchasing Gold ETFs, however, there is no interest that is offered, either.
Gold ETFs are extremely liquid as well, which means you can sell them any time when the markets are open. It’s also significant to remember that when you purchase a unit in a Gold ETF, you’re putting your money in gold or gold bonds that are 99.5% pure. There is no risk of impurity, which is something you can potentially face when you buy physical gold and since they’re in electronic form, they don’t require any storage.
Invest in Gold Companies
The third alternative is a great option for women who have already wet their feet with investing in the markets or Mutual Funds. Instead of investing in gold, you can invest in companies whose primary business is gold, such as jewellers or gold mining companies. There are also gold themed mutual funds which invest primarily in gold and gold related businesses. These are good options if you are looking for something different from the bonds or exchange traded funds, and are willing to take a slightly bigger risk.
All That Glitters?
Akshaya Tritiya is all about new beginnings, so if you’ve only been buying physical gold so far to mark the occasion, make a new beginning and begin investing. It is sure to bring you great prosperity.
Rupee Rani is a weekly column on finance for women. Write to us with your queries at firstname.lastname@example.org.