Digital Gold Vs. Gold ETFs: What should you choose and why?
Everyone knows how important and famous gold is, particularly in India. Thus, you must understand the difference between digital gold and gold ETFs, as learning about the newer and innovative methods of buying gold will help you out in the future. Spare8 is the best platform to consider if you are looking for ways to invest in gold.
Here we will look at and understand digital gold vs. gold ETFs. Both are digital ways to invest in gold.
What exactly is Digital Gold?
It is a new avenue to invest in gold. Digital gold promises you the avoidance of the hassles associated with holding physical gold. It ensures safekeeping, purity, liquidity, and offers the buyers convenience as they can also track the gold prices efficiently. Moreover, there is an ease of investment. You can purchase digital gold online directly from the sellers.
You need to open an account with your seller or via authorized platforms or well-known e-wallets like Amazon, Google Pay, and Paytm. At redemption, you can choose whether you want to receive physical gold or you want to sell the digital gold back to your seller. Different sellers keep their terms and conditions to keep your gold safely, and charges associated with the safe keeping of your gold generally begin to charge after a maximum storage duration.
One of the most useful benefits associated with digital gold is the low minimum purchasing amount which makes it quite accessible to many people. For example, on the Tanishq platform, the minimum purchasing amount is Rs. 100. However, it can even go to a very low amount on other platforms like Re. 1. You can also buy the gold at once or accumulate it like a SIP.
Eventually, the customer can receive this digital gold in their account whenever they want, or they can also sell it back at prevailing rates. Usually, the delivery of the gold is subject to delivery charges and a minimum quantity requirement. You can purchase digital gold at 3% GST. Digital gold’s cost structure is not standardized. Moreover, there are possibilities of additional storage charges and other charges like a trustee, insurance, etc. however, lack of regulations is the only flip side. SEBI, as of now, doesn’t regulate digital gold.
What exactly are gold ETFs?
Another popular way to invest in gold is gold ETFs as it helps you avoid the hassle associated with the physical safekeeping of the gold. Gold ETF in India is gaining wide popularity. These are investment instruments that enable you to invest in gold and closely monitor and track the physical gold’s domestic price.
You can also trade gold ETFs on shares, freely buying and selling them. Thus, making gold ETFs extremely liquid. You need a Demat account for buying and selling gold ETFs. However, gold ETFs in India are subject to another layer of cost, but it is a very low fund management fee.
Also, when you need to liquidate, all you need to do is sell the gold ETFs on the exchange. You will receive your amount in your account.
You must be wondering are gold ETFs backed by physical gold? Here, you do not have the option of receiving physical gold unless you meet some specified criteria, as it is generally reserved for big investors. Here comes the role of Spare8. You can contact them to clear all your gold investment doubts.
Gold ETFs in India also provide you the option of timing the market. It helps you efficiently realize gold price moves and accumulate through SIPs if you want.
Digital Gold Vs. Gold ETFs
Digital gold is quickly becoming the most popular mode to purchase gold as investors have the choice at the end to get physical gold too. Let us now compare digital gold and gold ETF.
You must understand that there is no meaningful advantage associated with digital gold if you compare it with investing through gold ETFs. The only negative point is the option of physical delivery, which the gold ETF does not offer.
However, physical delivery is not always useful for converting this gold into jewelry as jewelers may not accept your gold coins bought elsewhere. They can levy some additional charges if you want conversion. However, investors can redeem their preferred amount with gold ETFs and buy the jewelry. The regulatory criteria make gold ETFs attractive and preferred to invest over digital gold in the digital gold vs. gold ETF comparison.
Gold ETFs are regulated by SEBI and work with transparent structures. On the other hand, currently, digital gold is in a grey area. Thus, there is a risk associated with digital gold, and thus it is better to choose between both, keeping in mind these essential deciding factors. So, if you have to choose between the two, you must go for gold ETFs for now, as they are relatively safer than digital gold. For gold ETF effective recommendations, you must visit Spare8.
Before investing your money in any of these two options, make sure that you know the key differences between them.
Key Differences between Digital Gold and Gold ETF
Gold ETFs are exchange-traded, which means a limited time of investing (9 am to 3:30 pm) while you can buy and sell Digital Gold 24*7.
The digital gold has no additional cost besides a one-time 3% GST charge. Gold ETFs, on the other hand, incur annual charges.
Some Gold ETFs that you can find on NSE are Axis Gold ETF, Quantum Gold Fund, etc. Unlike Gold ETF, digital gold is much more affordable through apps or e-wallets as you can invest in digital gold for Re 1, which is not possible in the case of physical buying of gold. It also eliminates the extra cost like making charges.
Winding-up
If you are still confused about the best investment options, you can always visit Spare8, as they will be more than happy to solve all your investment doubts. Feel free to contact them.