You must have heard in some of the other advertisements that “gold lying in the house then why to cry” when it comes to long-term investment i.e. 10 years 15 years, even today the choice of people in the country is gold and real estate. Because here it is believed that the risk is very less and the returns are quite good.

Let us first show you proof, the chart given below is the graph of gold that how gold has grown year after year. In 2016 it was around ₹26000 and today it is trading around ₹50000. In these 7 years, the price of gold has increased by about 93% i.e. double the money directly.

There is no doubt that gold has given good returns to those who have invested in gold with 10 – 15 years of patience but now the matter is changing a bit.

Earlier people used to invest in physical gold because this was the only way people had.

But now people have many ways to invest in gold like a physical gold investment which you already know, second is digital gold and third is Gold ETF, and 4th is – Sovereign Gold Bonds.

The more ways there are, the more confusion has become for people and even a small mistake can sink your investment.

  There should be no mistake from you regarding gold investment, that is why we have written this article so that you can earn big profits and eliminate the fear of loss.

The chart below I have drawn for you. In this, I have compared all the four types of gold investments on eight different parameters so that you can get a clear-cut idea of who is the best among the four.

Before discussing the chart, let’s know in brief the definitions of these four investments-

Parameters  Physical Gold Digital Gold Gold ETF Sovereign Gold Bonds
Limit No minimum Limit No minimum Limit No minimum Limit Minimum 1 Gram
Security  High Risk of Theft Safe and Insured, No Regulator Safe and Insured, Backed by  Sovereign Guarantee
Purity Purity is not guaranteed No Purity Issue No Purity Issue No Purity Issue
Other benefits  No No No Fixed interest rate (2.5%)
Other charger and GST GST will Apply + 20% – 30% designing charges 3% GST. + Broker charge Total Expense Ratio &  It is tax-free on maturity.
Tracking  Tracking error Accurate Tracking Accurate Tracking Accurate Tracking
Loan Option Loan Available From Formal and Non- Informal Lander Not available right now but will be Soon Loan Available From Formal Lender Only Loan Available From Formal Lender Only
Risk/ Return High Risk Low Risk Low Risk Low Risk
–Comparison Chart–

Physical Gold

This is a very old method of gold investment, you must have already known it.

Almost every household in India is middle-class, whether it is a lower middle class or a high-class family, all have been making such investments.

That is, you went to a goldsmith’s shop, from there you bought some gold, put it in the bank’s locker or brought it to your house and locked it in the box and after a few years when the rate of gold was very high, you sold it.

But selling physical gold becomes a bit difficult because people who buy gold have an emotional attachment, especially of women.

We will talk about the advantages and disadvantages of investing in physical gold later, let us first see what is digital gold,

Digital Gold

Digital gold is also a type of gold but you can neither touch it nor wear it. Only you can hold it digitally.

The way you demand 1 gram, 2 grams, 3 grams from the goldsmith while buying physical gold and pay his money, similarly in digital gold also you pay money according to its rate.

But here you do not have to go to the goldsmith. You have to go to any such stockbroker who gives digital gold service to its consumer.

The concept of digital gold came around 2010, since then it has been very much in trend. You can invest in digital gold with just ₹ 100.

Digital gold investment is absolutely safe provided you do it with a SEBI registered broker.

The most important thing about investing is that here you are not bound by any kind of emotional attachment, you can sell your gold freely whenever you want.

Gold ETF

Gold ETFs first came into the market in 2007, they are also a type of digital gold, but when you buy gold ETFs, no entry-exit load is imposed on you and this is their special thing.

 You will find the prices of Gold ETFs on the website of BSE & NSE and you can invest in Gold ETFs by opening your account with any stockbroker.

If you take a gold ETF unit, then you will have to pay the rate of 1 gram of gold running in the market.

Sovereign Gold Bond

Sovereign Gold Bonds were issued by the Government of India in November 2015 under the Gold Monetization Scheme.

Sovereign Gold Bond Scheme is a gold bond scheme to invest in gold, which is issued by the Reserve Bank of India (RBI) on behalf of the Government of India.

The main objective of this scheme is to reduce the physical demand for gold so that India’s gold import can be reduced.

You will be surprised to know that India is the biggest importer of gold in the world. India imports about 800 to 900 tonnes of gold every year.

According to the analysis of the Ministry of Commerce, due to the import of more gold, there is an impact on the current account deficit (CAD) of the country.

It fell by 14.23% to $28.2 billion during 2019-20. In the year 2018-19, the import of gold was $ 32.91 billion.

This scheme was made by the government only to reduce the demand for physical gold.

In this scheme, gold bonds are issued to the investors, and the bonds can be sold after the maturity period.

Sovereign Gold Bonds can also be bought with Rs. The minimum investment in the bond will be from 1 gram, while a person can buy a maximum of 4 kg of gold.

These bonds can be traded on exchanges so that investors can exit ahead of time if they so desire.

These bonds are issued by the Reserve, so investors can avoid the risk that the company issuing the bond may go bankrupt or run away.

So this was the definition of all the methods of investing in gold; I hope you must have understood very well what is Physical Gold, Digital Gold, Gold ETF, Sovereign Gold Bonds.

Now let’s see the difference between these four and know that if you want to invest, then which option should you choose out of the four.

For this, let’s go through the bar chart again. On the chart, you can see that we have created the parameters and on that basis, we will compare these four

1. Our first parameter is “limit”:- there is no limit in physical gold, there is no limit to buy in digital gold also. Not even in ETFs but when you invest in Sovereign Gold Bonds, you have to buy at least 1 gram of gold.

2. Our second parameter is “Security”:- there is a lot of security in the investment of physical gold, as you know, many cases of gold theft are heard every day.

Murders also happen for gold, that’s why most of the people who invest in physical gold keep it in the locker, but sometimes incidents of theft come to the fore in the locker anyway.

In terms of security, there is a lot of risk in physical gold, while the risk of theft is zero in digital gold ETF Sovereign Gold Bonds because they are in digital format, and no one can steal them unless you transfer yourself to someone.

3. Purity:- Digital Gold, Gold ETF, Sovereign Gold Bonds are much better than physical gold even in the matter of purity, that many times it happens that you go to buy physical gold, and if the shopkeeper’s intention is bad then he will give you local hearing.

Take the rate of the original and later when you go to solve it with you, you do not get any rate for it. Whereas digital gold investing does not have this risk.

4. Other benefit:-Talking about some other benefits, in physical gold, digital gold, and gold ETF, you get profit only when the rate increases.

But when you invest in Sovereign Gold Bonds, you are given an interest rate of 2.5 percent per annum along with an increasing rate of return, so Sovereign Gold Bonds are the best in terms of this other benefit.

5. Other charger and GST:-  When you invest in physical gold, you have to pay the gold rate that is going on. Along with this, a design charge of 20 to 30 percent is also made on you and you also have to pay 3% GST on top of it, that is, it becomes a very expensive deal.

In the same digital gold, you are not charged any design charge, you have to do it at the current price of gold.

At the same time, GST of 3% is also applicable here and your broker also charges you something, so whenever you invest in digital gold, it is important to know all the terms and conditions by doing that.

What is their brokerage? What is Entry-Exit Load, extra? Sovereign Gold Bonds are tax-free on maturity.

6. Tracking:-  Tracking gold investment is quite easy no matter which way you invest in gold, but when you invest in digital gold, your tracking is more accurate than physical gold investment.

Because you get a lot of data digitally about your investment, as well as you will be able to track your lender, what is his history, is there any fraud case on him, while in physical it can happen that If you do not know much about the lender, then digital gold is the best in terms of tracking.

7. Loan Option:- One plus point of physical gold is that you can mortgage your gold with any goldsmith or bank and take money which is called a gold loan.

There is currently no loan option available in Digital Gold. In Gold ETFs, you can take a loan only from a formal lender.

8. Risk/ Return:- Eighth our parameter is “Risk and Return”. Look, no matter what kind of gold you invest in, if the rate of gold increases, then your rate of gold will also increase, but there are some third-party factors that affect your returns.

 As I told you earlier that if you invest in physical gold then there is a fear of theft. If you listen to the day-to-day basis, then the risk increases a bit, as well as due to the designing charge, you have to pay 20-30% more.

There is no hassle of any kind of theft in digital gold as well as you do not have to pay design charges but you have to pay brokerage charges.

On the other hand, if we talk about Sovereign Gold Bonds, then here you also get an annual interest of 2.5% and because this is a government scheme, there is no question of pointing fingers at safety here.

Overall, if we understand, in today’s date digital gold investment is better than physical in every respect. Now let us see what are the things you should keep in mind when you are investing in digital gold-

Before investing in digital gold, you have to see what fees your fund manager or broker charges.

Along with this, you have to see its track record of the last 5 years to see how it is providing its service to its customers. What is the problem facing the customer?

After this, one more thing you have to keep in mind, if the quantity of your digital gold is 8 grams, then only you can convert it into physical gold.

Never make a huge investment in gold, invest only 10 to 20 percent of your portfolio in gold, along with this you can also invest in top mutual funds and bonds.

We have made a detailed video on portfolio diversification, the link will be found in the description, you can go and watch that video from there. How have you diversified your portfolio, do tell in the comments?

 Lastly, you need to keep in mind that the one you are investing in is gold through the broker or fund manager.

Their transparency should be good and give you real-time updates, there are many brokers in the market who do not give real-time updates.

Due to which the investors sometimes incur significant losses, then it is very important for you to keep in mind, because if you do not know immediately when the rate changes, then you will also not be able to earn the right profit.

It is our endeavor that I bring awareness among you people as much as possible from my article so that you do the right investment, invest money in the right direction, and earn big profits.