In India and all around the world, gold is a preferred investment option. Lately, digital gold is also gaining popularity. This is because investing in gold this way is more convenient without worrying about its storage and safety.Â
You can make investments in digital gold via small instalments for a specific tenor.
Investment Options for Digital Gold
Unlike physical gold, purchasing digital gold typically requires a mediator. This could be a mutual fund house or another entity that invests in gold on your behalf, depending on your chosen investment option. You can explore and choose from the following investment options based on your preference:
Gold Mutual Funds
Gold mutual funds work like equity mutual funds, but instead of investing in shares of companies, they invest in gold. This can include physical gold, paper gold, or shares in gold mining companies.Â
However, at least 80% of the investments of the fund must be in gold and gold-related instruments.
Gold Exchange-traded Funds (ETFs)
A gold ETF is designed to track the price of physical gold. It is a type of passive investment that invests in gold bullion, with its value directly linked to gold prices. In simple terms, gold ETFs are units that represent physical gold, either in paper or digital form.
Sovereign Gold Bonds (SGBs)
The Reserve Bank of India (RBI), on behalf of the Indian government, offers Sovereign Gold Bonds (SGBs). Each bond represents one gram of gold.Â
These bonds are an attractive investment option because their value increases with rising gold prices. Additionally, they provide an annual interest rate of 2.5%, enhancing their appeal.
Benefits of Investing in Digital Gold
Investments in digital gold are on the rise because of the numerous benefits it offers. Here are some of the top advantages you can enjoy:
High Purity
All virtual gold traded on stock exchanges is 24 karat, or 99.9% pure. This is the highest purity of gold that you can get. Therefore, you do not need to worry about its purity or authenticity. Due to the high purity, the risk of fraud is eliminated, and you receive the exact value you paid for.Â
Easy Liquidity
Another major benefit of digital gold is that you can easily exchange it for physical gold, coins, or bullion. This flexibility lets you convert your digital assets into physical ones whenever needed.Â
You can buy and sell at any time and from anywhere while getting the benefits of accessing it virtually anytime.
Adequate Security
The most significant advantage of digital gold is its convenient and secure storage. The company providing digital gold will store your purchased gold in secure vaults. Since you don’t physically hold the gold, you can avoid locker fees and the risks of theft or loss.
Additionally, storing gold in a demat account is generally cheaper than storing physical gold, which may incur locker and insurance costs. Moreover, as digital gold is in electronic form, it does not suffer from wear and tear.
Serves as Collateral for Loans
You can also pledge your digital gold as collateral to get loans. Some lenders accept it because it has 24 karat purity and is stored in secure vaults.Â
This helps reduce the chances of your loan being rejected since the asset serves as security and reduces the default risk for the lender.
No Lower Limit on Investment
When investing in physical gold, you need to buy a minimum quantity. This means you will have to spend a significant amount to purchase gold. In contrast, most mutual funds, ETFs, and bonds do not have such requirements.Â
You can invest any amount you choose, and you will receive gold proportional to the amount you invest.
Risks Associated with Digital Gold
Like every investment option, digital gold also comes with certain risks. To make a well-informed investment choice, you need to be aware of the following risks:
No Regulatory Body
One of the main limitations associated with investing in digital gold is the lack of regulatory agencies. There are no governing rules and regulations for trading these investment options. Therefore, it is essential to carry out due diligence on the digital gold provider to reduce risks.
Time Limit on Storage
Physical gold is kept in secure and insured vaults. Many platforms offer these storage services for a set period. Once this period ends, you will need to either withdraw or sell the gold.
With this information in hand, you can decide whether digital gold is a suitable investment option for you. You can start your investment on Bajaj Markets with minimal formalities and sell or redeem it as per your requirements.Â
Apart from this, you can also get an insurance plan on Bajaj Markets, alongside numerous other financial products and services. These include mutual funds, bonds, loans, credit cards, and much more.
