Digital Gold vs Gold ETF Returns: Apart from buying physical gold, there are some ways to invest in gold, two such popular ways are Digital Gold and Gold ETF (Exchange Traded Fund). Know the difference between them here, and where should you invest money in terms of profit?
Digital Gold vs Gold ETF Investment: Investing in gold is like a tradition in India. It is a companion in difficult times and also a symbol of prosperity. But now the time is gone, when one had to go to the goldsmith's shop and bargain to buy gold. In today's digital era, there are two smartest and popular ways to buy gold - Digital Gold and Gold ETF (Gold Exchange Traded Fund).
But hearing the names of these two, it seems that they are the same, so most people get confused. Whereas this is not the case at all. The way of working, benefits, rules and charges of both are completely different. Let us know which option is more 'strong' for you.
What is digital gold?
This is the easiest and newest way to buy gold.
How does it work?
You can buy 24 carat pure gold directly from your favorite payment app (like Paytm, Google Pay, PhonePe) or the website of companies like MMTC-PAMP. Your purchased gold is kept safe in an insured wallet in your name.
Who is it best for?
This is best for those who are investing in gold for the first time, who do not have a demat account, and who want to start with a very small amount (like ₹ 1, ₹ 10, ₹ 100).
What is Gold ETF?
ETF means Exchange Traded Fund.
How does it work?
Gold ETF is a type of mutual fund that invests in gold. You can buy and sell it on the stock exchange (NSE/BSE) just like shares of a company. 1 unit of Gold ETF is usually equal to 1 gram of gold.
Who is it best for?
It is meant for investors and traders who have a demat account, want to trade in gold, and need high liquidity (easy buying and selling facility).
Which is better for you?
You should choose digital gold if...
You want to start small
If you want to add gold with a small amount like ₹100, ₹500 or ₹1000 every month, then digital gold is best for you.
You do not have a demat account
If you do not want to get into the hassles of the stock market and want to buy gold without a demat account, then this is the only digital option.
You need real gold in the future
If your goal is to gradually accumulate gold and bring it home in the form of gold coins or biscuits in the future, then digital gold provides this facility.
You want to give a gift, you can easily gift digital gold to anyone.
You should choose gold ETF if...
You are an experienced investor
If you already have a demat and trading account, then it is very easy for you to buy ETF.
You need more liquidity
If you want to trade gold like a stock and want your money to come into your account immediately, then ETFs are better.
You want a low-cost investment for the long term
In the long run, the total expense ratio of gold ETFs is less than the spread of digital gold.
You want a regulated product: Gold ETFs operate completely under SEBI regulations, which gives it an additional layer of security.
Which option is better for you?
Both digital gold and gold ETFs are better options than buying physical gold. Which of the two is 'stronger', depends on your own need.
If you are a common, small investor. Want to buy gold in which the purity of gold is guaranteed, and there is also the ability to convert it into real gold (physical gold) in the future, then digital gold may be right for you. This is great for small, regular purchases
On the other hand, if you are already investing in the stock market and want a low-cost and regulated way to track gold prices, then gold ETFs make sense. This is ideal for investors who do not need delivery of physical gold and want to invest in gold in their demat account for the long term, without much hassle.
Frequently Asked Questions (FAQs)
1. Is digital gold safe?
Answer: Yes. When you buy digital gold from a reputed platform (like MMTC-PAMP), your gold is kept safe in a 100% insured wallet and monitored by an independent trustee.
2. Which of the two has better tax rules?
Answer: The tax rules for both are exactly the same. If you sell before 3 years, the profit will be added to your income and taxed as per the slab (short term capital gains). If you sell after 3 years, the profit will be taxed at 20% with the benefit of indexation (long term capital gains).
3. How can I convert gold ETFs into physical gold?
Answer: It is very difficult and expensive to convert gold ETFs into physical gold. For this, you need to have a very large quantity (usually 500 grams or 1 kg) of ETFs. Therefore, if your goal is to buy physical gold, then digital gold is better.
4. Is GST applicable on digital gold?
Answer: Yes, when you buy digital gold, you have to pay 3% GST on it, just like physical gold. However, GST is not applicable while selling.
5. Can I do SIP in gold ETFs?
Answer: Yes, you can also do SIP in gold ETFs through your broker.
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