Almost every Indian family cherishes gold. Why wouldn’t they? It makes you glow at weddings and acts as a helping hand in times of crisis. When you are drowning in responsibilities, gold becomes the one bastion you can stand on. Even investors agree. In the tumultuous sea of financial strain, gold stands like a wharf, steady and dependable, helping you meet your responsibilities without constant worry. If you want to invest in gold but are not sure whether to choose physical gold vs Gold ETFs, you should read this article carefully. It will help you decide the winner between physical gold and Gold ETFs.
What is a Gold ETF and How Does It Work?
Have you ever bought gold? If you have, then you understand how hard it is to keep it safe. Whenever you leave the house, you triple-check to make sure it is locked. Even when you return home, you worry about news of robberies and hope you do not become a victim. It is a very stressful life, which is why Gold ETFs are extremely helpful.
In Gold ETFs, you do not buy physical gold. Instead, you invest in a fund that is traded on the stock exchange like shares. One unit of a Gold ETF usually represents one gram of 99.5 percent pure gold.
To start investing in ETFs, you need a demat account and a trading account. You can buy and sell Gold ETFs only during market hours, just like stocks.
Physical Gold vs Gold ETFs – Differences
There is a lot of confusion among people about what to invest in and what not to invest in. Physical gold, as the name suggests, is something you can touch, wear, and gift to someone special. When you hold something valuable in your hand, you also carry the fear of losing it.
Gold ETFs remove that fear. You do not own the gold physically, but you still own it as an investment. There is no need to worry about storage, no negotiation of prices, and no risk of broken jewellery. You can protect your wealth without stress, and you can buy or sell your investment easily during market hours.
If you are thinking of getting physical gold as a form of investment, remember that jewellers charge making charges. These charges increase the cost and may not be returned when you sell the gold later.
Physical Gold vs Gold ETFs – Which Is Better?
People often ask this question, so let us compare both options using different factors.
1. Liquidity – Which Is Easy to Sell?
Gold ETF is easy to buy and sell. You can sell it on the stock market during market hours, just like shares.
Physical gold can also be sold, but sometimes it takes time. You must visit a jewellery shop. The shop may offer less money and may deduct making charges. Sometimes they may not even buy your jewellery.
So, Gold ETF is easier and faster to sell.
2. Storage – Where Do You Keep It?
Gold ETF is digital, which means it stays safely in your demat account. You do not have to keep it at home.
Physical gold must be kept at home or in a bank locker. If you keep it at home, you may worry about theft. If you keep it in a bank locker, you must pay locker fees every year.
So, Gold ETF removes storage tension.
3. Safety – Which Is Safer?
Gold ETF is safer because it is digital. As long as you protect your account credentials, your investment remains secure.
Physical gold can be stolen, lost, or damaged over time. You must always take care of it.
So, Gold ETF is generally safer.
4. Cost – Which Is Cheaper?
Gold ETFs have small charges such as demat fees and fund management fees. These are usually lower than the making charges and storage costs of physical gold.
Physical gold has extra costs. Jewellery includes making charges, and you may not get this money back when you sell it. You may also have to pay locker fees.
So, Gold ETFs usually cost less.
5. Tax – Is There a Difference?
Tax rules are mostly the same for both. If you keep gold for more than 2 years, you pay 12.5% tax on the profit. If you sell before 2 years, you pay tax according to your income tax slab.
So, taxation is almost the same for both investments.
Final Thoughts
You can choose one or both options. Buy physical gold for wearing and family purposes. Buy Gold ETFs for saving and growing your money safely.
The most important thing is to understand your needs before you invest. Get in touch with mutual fund advisor to learn more.