Investing in gold without breaking the bank: A smart saver’s guide

Gold has been a safe store of wealth for Indian families for centuries, offering economic as well as emotional security. But with gold prices at record levels, buying physical gold in large quantities is not always possible. But the silver lining is that there are numerous alternatives to buying gold at half the price, making you available to the metal without singeing your wallet.

Why gold is still in fashion

Gold is a hedge against uncertainty of economies, inflation, and currency volatility. It also has cultural significance among Indian investors with demand from wedding season and festivals. Gold never acts like equities in uncertain markets. However, while conventional buys like coins or jewellery still make great choices, they bear hefty making charges and storage fees. Hence, wiser alternatives have come into view for thrifty investors.

Gold exchange-traded funds (ETFs)

Gold ETFs are likely to be the easiest way to invest in small quantities of gold. Traded on stock markets, each unit typically equates to a gram of gold. They are bought and sold just like shares, with no issue of purity or custody to consider. It does not take much to get in—you can start off at the price of one unit. But ETFs do need a demat account and there are minimal annual expense charges to pay.

Sovereign gold bonds (SGBs)

Guaranteed by the Government of India, SGBs allow the investor to buy gold in electronic form at much lower costs than buying jewellery. Denomination is as low as one gram so it is easy to invest in small amounts. The best-selling feature of SGBs is the 2.5% interest on the annual appreciation in the price of gold. They also solve the storage issue. The only flip side is that pre-withdrawal is not permitted before five years, though they can be sold on stock exchanges.

Digital gold

Websites for buying gold online by fintech companies allow you to buy gold in amounts as small as ₹10. The gold is collateralized against physical holdings that are stored in secure vaults but owned by you and held online. You have the option to, in the future, trade your holdings in jewellery, coins, or bar form or simply sell them online. As convenient as this is, investors would do well to check out the reputation of the platform as well as the charges made before subscribing.

Gold mutual funds

For others, there is gold mutual fund, a good option for the novice. Mutual funds invest in gold ETFs for you and offer the advantage of systematic investment plans (SIPs) starting with ₹500. They offer you professional management and liquidity but allow you to purchase gold exposure in pieces over time. The quirk is a little higher expense ratio compared to direct ETFs.

The bottom line

Purchasing gold is not any more a question of gargantuan lump sums or physical ownership. With government bonds, online websites, ETFs, or mutual funds, small regular investments can give you the benefits of gold ownership without any major costs. For long-term wealth generation, these instruments along with your entire portfolio are capable of diversifying and making you wealthier.

FAQs

Q1. Is digital gold safe?

Digital gold is usually backed by physical holdings, but security comes from the reputation of the platform. Always go with RBI-regulated or well-known providers.

Q2. Gold ETF or sovereign gold bond—what’s best?

ETFs offer liquidity and convenience, and SGBs offer additional interest returns but with extended lock-in. Your choice depends on whether you want short-term liquidity or long-term gains.

Q3. Can I invest in a SIP in gold?

Yes, gold funds allow SIPs as small as ₹500 a month, hence making it an easy way to accumulate gold exposure over time.