Gold, SGB or ETF: In our country there is a tradition of buying gold or investing in gold on Dhanteras. It is believed that buying gold on this day brings prosperity to the house and removes negativity. Now as the festival approaches, a big question arises before the investors whether they should invest in physical gold, gold ETF or sovereign gold bond scheme (SGB) which is the best option? Let’s know the answer to this question…
physical gold : Physical gold is the gold that we buy from the bullion market in the form of gold bars, jewelery etc. There are many challenges associated with investing in this most popular gold. Such as storing it in a safe place, concern about its purity and return on its return.
Gold ETF: Gold ETFs, on the other hand, are a convenient way to invest in gold. Although available in the form of a piece of paper, it offers the same flexibility as investing in shares. However, for long-term investors, they also have to pay management fees and taxes for investing in gold ETFs.
Sovereign Gold Bond: If we talk about SGB, out of these options it has emerged as the best option for investors this Dhanteras. SGBs are government securities denominated in grams of gold. Its benefits make it the best of all options.
Difference between physical gold, gold ETF and SGB
Maintenance and Purity: Physical gold requires safe storage and purity testing. While gold ETFs and sovereign gold bonds do not need to worry about storage or purity.
Liquidity: Physical gold must be sold through dealers or bullion shops. Whereas, the liquidity of gold ETFs is much higher. You can sell it anytime from your mobile at the market rate. It is traded in the stock exchange. On the other hand, sovereign gold bonds are less liquid than ETFs but are liquid enough. It can be withdrawn after 5 years.
Interest Income: If you keep physical gold in your home, you don’t earn any interest on it. Gold ETFs also do not offer interest, but sovereign gold bonds offer 2.5% annual interest, which is taxable as per the investor’s tax bracket.
taxes: Sales of physical gold and gold ETFs are potentially subject to long-term or short-term capital gains. On the other hand, capital gains are tax free if the SGB is held for maturity (8 years).
Sovereign Guarantee: There is no sovereign guarantee on the physical gold you hold. Similarly, gold ETFs also have no sovereign guarantee, but as the name suggests, sovereign gold bonds come with a sovereign guarantee. If we talk about risk, holding physical gold has default risks like theft or loss, but sovereign gold bonds or gold ETFs are free from such risks.