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How to Invest in Paper Gold in India? October 12 2022Stock Market Education

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How to Invest in Paper Gold in India

Gold has always been a preferred investment option for Indians. It is a highly liquid asset and has the potential to generate good returns in the long term. However, holding gold in physical form has many drawbacks. The safety of holding gold in physical form is one of the main concerns. To overcome the risks of holding gold physically, you may invest in paper gold in India.

Different Ways to Invest in Paper Gold in India

· Gold Electronic Traded Funds (ETFs)

One of the ways on investing in paper gold is through Gold ETFs. Purchasing Gold ETFs units is similar to purchasing stocks on the stock exchange. These units are available at the current market price of gold. These units can be traded on the commodity exchange. You can purchase these ETF units through lump sum investment or via SIP at regular intervals.


· Sovereign Gold Bonds (SGBs)

If you are planning to purchase paper gold you can invest in Sovereign Gold Bonds (SGBs). These bonds are issued by the Reserve Bank of India and they come with a sovereign guarantee. An individual can purchase these bonds when the window opens for a particular time interval. The window for the purchase of SGBs usually opens once in 2-3 months. If an individual wishes to buy SGBs outside this window, they may purchase them from the secondary market.


· Gold Mutual Funds

One of the ways to purchase paper gold is by investing in gold mutual funds. These funds invest in gold ETFs and are managed by professional fund managers. This investment will help you in diversifying your portfolio and reduce the overall risk.


· Digital Gold

You can now make an online purchase of gold coins, jewellery or bars. The process of buying gold online is similar to buying physical gold. The purchase made by you will be stored in a digital locker that you can access anytime using digital platforms. You can buy or sell gold digitally using those platforms. Digital gold makes gold accessible and solves the problem of physical storage.

The above mentioned are some of the ways through which you may invest in paper gold in India. Before investing in any of the options, one must think carefully. For example, SGBs are useful for long-term investors, while Gold ETFs offer better liquidity in comparison to SGBs.

One more important criterion that investors must consider while investing in gold is taxation on gains. For example, gains made from SGBs are exempt from taxation in case of redemption, but in Gold ETFs, the long-term capital gain is applicable at the rate of 20% after indexation. Therefore, make your gold investment decisions wisely and after considering various investment goals. 

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