Dhanteras 2023: ETFs or Gold Bonds which one to invest in? 

Introduction 

As we gear up for Dhanteras 2023, you may be considering buying gold, a tradition many of us follow. However, did you know that there are new and innovative ways to invest in gold, such as Gold Exchange-Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs)? In this article, we’ll explore these digital gold investment options and help you make an informed choice for this Dhanteras.

1. Easy Access to Your Gold 

Traditionally, people love physical gold because it’s easy to get. You can buy and sell it whenever you like. But there’s a catch – the prices can be tricky. You might buy gold at one price and then sell it for much less, which means you lose money. Let’s look at an example: You buy a 10-gram gold ornament including making charges for Rs 60,000 as of 03 November 2023 Later, when you want to sell it, the buying rate is only Rs. 57,000 or 58,000. You have loss around 2,000 to 3,000 because of the price difference which includes making and wasting charges. 

On the other hand, Gold ETFs are like a modern solution. They are traded on stock exchanges, which means you can sell them at the current market price without losing much money. For instance, if you bought 100 units of Gold ETF for Rs.5200 i.e. (Rs. 52 per unit) as of 03 November 2023 and later want to sell it, you can do so at the current market rate. Even if the rate falls to Rs 51 or 50 the difference is just Rs.100 -200, which is a much smaller loss compared to physical gold.  

The difference between buying and selling prices for Gold ETFs is very small, making it a smart and convenient way to access your gold when you need it. Therefore, Gold ETFs are considered as a better option when compared with physical gold. Also since the initial amount required is small it is ideal for all including those with a limited ability to invest 

Sovereign Gold Bonds are quite similar to Gold ETFs. You can buy and sell them through banks and online platforms. They offer good liquidity, but there might be different tax rules, so it’s essential to consider that.  

2. Keeping Your Gold Safe 

Physical gold is beautiful, but it comes with risks. You have to keep it safe from theft or burglary, and that’s not always easy. Now, let’s consider Gold ETFs and SGBs. With these, your gold is stored electronically in your DEMAT account, which is like an online vault for your investments. It’s safe and easy to handle, and you don’t have to worry about someone stealing your gold. 

3. Saving on Taxes 

If you plan to keep your gold for a while, you should think about taxes. Physical gold, Gold ETFs, and SGBs all qualify for lower taxes if you keep them for more than three years. Let’s say you bought some gold and its value increased. If you sold it after three years, you would pay 20% tax on the profit. 

 Now, here’s where SGBs stand out. If you keep them until they mature (usually after 8 years), you won’t have to pay any taxes on the gains. It’s a tax-saving feature that can make a big difference in your overall earnings. Let’s say you invested Rs 50,000 in SGBs, and after 8 years, it’s worth Rs 70,000. If you sold physical gold, you would have to pay a tax on that Rs 20,000 profit. But with SGBs, it’s all yours! 

4. Earning More from Your Gold 

Both Gold ETFs and SGBs follow the price of physical gold. So, when gold prices go up, you benefit. But SGBs have a little extra to offer. They give you an annual interest of 2.5% on the amount you invested. This interest can add up and make your returns even better, especially if you plan to invest for a long time. Let’s say you invested Rs 50,000 in SGBs, and after one year, you’d get an extra Rs 1,250 as interest.  

5. Getting a Loan 

Sometimes you might need a loan, and you can use your gold as collateral. You can do this with physical gold and SGBs. For example, if you have physical gold worth Rs 1 lakh, you could get a loan of up to 75% of that value, which is Rs 75,000. It’s a smart way to access cash when you need it. 

Unfortunately, Gold ETFs don’t offer this option. So, if you’re thinking about getting a loan against your gold, SGBs are the way to go. 

6. Flexibility in Investing 

Investment flexibility is crucial when you want to invest a little at a time and grow your gold savings. Both Gold ETFs and SGBs let you start with as little as 1 gram of gold. This way, you can build up your gold stash slowly and benefit from changes in the gold price over time. 

 Physical gold doesn’t offer this kind of flexibility. It’s not easy to buy and keep small amounts, which can make it harder to grow your gold savings gradually. 

7. Eco-Friendly Investing 

Another point to consider is the environmental impact of your investment. With physical gold, there’s mining, which can harm the environment. Gold ETFs and SGBs don’t involve mining hence they’re considered as eco-friendly choices. So, if you care about the planet and want to invest responsibly, these digital options are worth considering. 

8. No Storage Worries 

Physical gold needs a safe place for storage. You might have to pay for a secure locker or take precautions to keep it safe at home. This can be a hassle and an additional cost to consider. 

With Gold ETFs and SGBs, you don’t have to worry about storage at all. Your investment is held electronically, so there’s no need for a physical vault or security measures. It’s a hassle-free way to own gold without the added expense or concern of keeping it safe. 

9. Low Initial Investment 

If you’re just starting to invest in gold, you might not want to put down a significant amount of money upfront. Gold ETFs and SGBs allow you to begin with a relatively small investment. For example, you can purchase as little as 1 gram of gold through these options. This low barrier to entry is great for new investors who want to dip their toes into the world of gold without a huge financial commitment. 

10. Safe from Market Fluctuations 

Physical gold prices can be influenced by various market factors, including the demand for jewelry or geopolitical events. These fluctuations can sometimes lead to unpredictable price changes. 

Gold ETFs and SGBs are linked to the market price of gold, but they aren’t directly impacted by these market forces. The prices of these digital gold options are usually more stable, offering you a more predictable investment experience. 

How to invest in ETF through Navia 

1. Initiate your Navia journey by downloading the Navia app from the Play Store, especially if you are a new user. 

2. Launch the Navia app and access your account by providing your login credentials. 

3. Navigate to the “Tools” section on the app’s homepage and opt for the “Basket” feature. 

4. Choose the “default baskets” option. 

5. Browse through the array of available basket selections and make your choice based on your preferences and investment goals. 

 6. Upon selecting the desired basket, proceed to place your order by providing the necessary information and required credentials. 

7. Once your order placement is complete, proceed for payment. 

8. Following successful payment, your chosen baskets will be purchased, and you can conveniently monitor the progress of your order through the “my baskets” feature within the application. 

Conclusion 

As you prepare for Dhanteras 2023, you have more options than ever for investing in gold. Physical gold is timeless, but digital gold options like Gold ETFs and Sovereign Gold Bonds offer convenience, safety, and unique advantages. When deciding between these options, think about what matters most to you: liquidity, safety, tax savings, additional earnings, the option for a loan, and investment flexibility. 
 
In the end, there’s no one-size-fits-all answer. Sovereign Gold Bonds can be a good choice for long-term investors, especially if you want to save on taxes and earn interest. But if you value the security of physical gold, liquidity at market prices, and the ability to invest a bit at a time, Gold ETFs might be the better choice for your Dhanteras celebration. 

 Investing in gold is a cherished tradition, and now, with digital gold investment options, you can make this festive season even more rewarding. So, choose the way that fits your needs and financial goals. Happy Dhanteras! 

To learn more about ETFs, feel free to browse our collection of articles available on Navia.

DISCLAIMER: Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit.