Physical gold vs gold ETF vs gold mutual fund: Should I buy physical gold as a source of investment or just for aesthetic purpose? Will investing in gold ETF with a low expense ratio will be better for me than investing in physical gold?
Or should I invest in gold mutual funds as they can be bought and sold at any time of the day?
As India is celebrating Dhanteras today (Tuesday, October 29, 2024) and Diwali is falling on October 31, these questions often bother a lot of investors.Guoabong Investment
For most people, the most popular choice is physical gold.
Possessing physical gold is considered a mark of prosperity, auspiciousness, and prestige in a society.Varanasi Stock
But we live in times where nearly every investment type has taken the electronic form.
Physical gold is no exception. Gold ETF, Sovereign Gold Bonds (SGBs), and gold mutual funds are three popular forms of electronic gold.
When it comes to accentuate the aesthetic beauty, physical gold is the obvious choice, but as a source of investment, should one go for physical gold, gold ETF, or gold mutual fund?
Vivek Banka, co-founder, GoalTeller, an investment firm, gives tips that can ease your problem of picking between gold, gold ETF, and gold mutual fund.
Banka says, "Physical gold typically is best only for aesthetic purposes, and if its for investment, a gold fund or a gold ETF is best. The tax on these for more than 2 years and 1 year of holding period, respectively, is 12.5 per cent. It has ease of transactions and low costs, making them better than physical gold."
Banka says gold has seen a big up move, and at this point, I would be reluctant to get into fear of missing out (FOMO) and invest large sums in gold.
Gold price are largely affected by the ups and downs of the share market and geopolitical situations.
When the share market spirals downwards for weeks, investors move towards gold investment.Varanasi Investment
On the other hand, when there is a war, geopolitical tensions, or an important political event, the gold price moves fast.
With the US Presidential Elections scheduled this year, the outcome is most likely to impact the gold rate.Agra Wealth Management
Banka says, "The US election outcome will have a bearing on gold prices as a Donald Trump victory would mean possibilities of easing geopolitical tensions, thereby reducing somewhat the attraction of gold."
For investors who have made up their mind for purchasing gold, what should be their investment horizon and what should be their gold allocation in their portfolioKolkata Investment?
Banka says, "Gold should be bought as a long-term investment and a hedge to political crisis and I recommend an allocation of anywhere between 2.5 per cent - 5 per cent of ones net worth into gold at maximum."
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