Khota Paisa

How To Invest In Gold?

Posted in Investment by khotapaisa on November 23, 2009

I have been planning to invest in gold for some time now. The cheapest way for me to invest in gold is thru gold ETFs. But I have not gone the ETF way as I don’t plan to keep my demat account. That brings the question of alternative ways to invest in gold. If you don’t/can’t invest in gold in demat form, the only other way to own gold is buy it in physical form. You can do it by buying it either in form of jewellery, coins or bars. But buying gold in physical form is a costly affair for the following reasons.

Premium : Whenever you buy any gold item, you pay the making charge, wastage and tax (as VAT) on it. This increases the cost of gold for you because when you sell gold, you will be paid only for the amount of gold. To minimize this cost, you should buy gold coin or bar as they have the least making/wastage charge.

Safety : This is the most important reason against owning gold in physical form. If you plan to invest in gold, you would typically be buying it regularly over a long period. Over a period of time, you will have enough gold with you to worry about it’s safety. So, if you own gold in physical form, you must have bank locker facility available to you.

Selling : Selling gold is as complicated as buying it. You would find it easy to exchange gold for jewellery but it’s not that easy to sell it for cash. On this front also, gold coins & bars provide better option. Some gold retailers like Tanishq buy gold coin (preferably of their own make) easily and pay in cash. But even when you get to sell it for cash, you will be paid thru cheque or DD. Though it may not be an issue, it certainly adds to your effort & time.

So if you are one of those who don’t/can’t buy gold in demat form, keep the following in mind while buying gold.

– Buy gold coins or bars.

– Find out the rate of gold coin/bar (22k or 24k) from different retailers.

– Avail bank locker facility for storage.

– Buy periodically in small amounts.

– Invest in gold over a long time and just hold it. Afterall, selling gold is not considered good (not without reasons).

– Let gold bring luck to you.


2 Responses

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  1. Yogesh Pant said, on November 23, 2009 at 7:17 pm

    Nicely written article for a laymen like me, also because, few months back we were kind of planning to put some money into gold. I would request you to educate us more on the option of investing in gold through ETF (I do have a Demat account with Sharekhan). Also, curious to know why a person like you won’t go the ETF way and why you have resisted yourself from opening a Demat account. Finally, as always, liked your comment – Let gold bring luck to you. Just wondering, if Lady Luck will favor only those who buy “solid” gold (like you!). What about people who buy gold bonds!

    • khotapaisa said, on November 23, 2009 at 9:57 pm

      🙂 Yogesh, first of all Lady luck is wished to be with anyone who buys gold(I guess to gold ETFs as well). As you requested, I would try to write a post on investment in gold ETFs. Coming to your very valid question as to why I want to invest in physical gold, I personally don’t like to do long term transactions online. Since gold is supposed to be held for long time, I prefer going old way even though it is costlier than ETF(btw, who doesn’t like to see gold coins in hands!). And when it comes to money, the first rule is not to invest if you don’t feel comfortable with it…no matter how good the investment is. Afterall there is a personal in the term personal finance.

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