Gold has given very good returns over the last few years. There are various options available for investors wanting to invest in Gold. This post offers a comparison between various investment options available in Gold.
While e-gold directly tracks the domestic, physical gold prices, gold ETF only mirrors them. Certain gold ETFs have the flexibility to invest up to 10% of the total net assets in money market instruments and this can lead to tracking error. Some ETF companies also invest in gold futures and in a basket of gold mining companies. The earnings of a gold mining company may not reflect the price movement in gold, thereby reducing the impact of the price rise. As a result, the returns from ETFs may not be similar to those from investing in physical gold.
While eGold offers highest returns in comparison to Gold ETF and physical gold, Gold ETF has a better taxation as one needs to hold Gold ETF for only 1 year to be considered a long term capital gain and taxation is 10% - half of what is there for eGold. Also, one does not need to pay wealth tax.
However, eGold offers option to take physical delivery at multiple centres and option to convert it into jewellery with select and reputed jewellers.
Parameters
|
E-Gold
|
Gold ETF
|
Bars / Coins
|
Form of Holding
|
Demat
|
Demat
|
Physical
|
Market Timings
|
10:30 am to 11:30 pm
|
9:15 am to 3:30 pm
|
As per Bank or
Jeweller timings
|
Physical Delivery
|
Possible for any
number of units
|
Possible only above 1
Kg
|
Not Applicable
|
Physical Delivery
Centers
|
Multiple
|
Single
|
Single
|
Convert to Jewellery
|
Option available with
select reputed Jewellers
|
Not Available
|
Option available if
purchased through Jeweller
|
Pricing
|
Linked to Indian Gold
Prices
|
Linked to
International Gold Pricing
|
May differ as Banks
and Jewllers charge premium anyways
|
Impurity Risk
|
Cannot exist
|
Cannot exist
|
May exist
|
Security
|
Responsibility of
exchange
|
Responsibility of
custodians of mutual fund
|
Responsibility of
investor
|
Resale
|
Transparent - At
secondary market prices
|
Transparent - At
secondary market prices
|
Banks do not buyback,
Jewellers buyback at a discount
|
Convenience of
buying, storage and selling
|
High
|
High
|
Low
|
Recurring expenses
(Storage, Insurance and Maintenance)
|
0.40%
|
1%
|
High Locker Rent and
Insurance
|
Returns
|
Highest as it is the
most cost effective
|
Slightly lower than
Gold ETF
|
Lowest in this
category
|
Liquidity
|
Rs 200-250 crore
turnover
|
Rs 10-15 crore
turnover
|
Figures not available
|
Taxation
|
Need to hold for 3
years to be considered a long term capital gain which is 20% in eGold. Wealth
tax is also applicable.
|
Need to hold for 1
year to be considered a long term capital gain which is 10% in Gold ETF. No
wealth tax applicable.
|
Wealth tax applicable
|
Administration
|
Need a separate Demat
Account other than shares
|
Same Demat account as
shares
|
Not Applicable
|
While e-gold directly tracks the domestic, physical gold prices, gold ETF only mirrors them. Certain gold ETFs have the flexibility to invest up to 10% of the total net assets in money market instruments and this can lead to tracking error. Some ETF companies also invest in gold futures and in a basket of gold mining companies. The earnings of a gold mining company may not reflect the price movement in gold, thereby reducing the impact of the price rise. As a result, the returns from ETFs may not be similar to those from investing in physical gold.
While eGold offers highest returns in comparison to Gold ETF and physical gold, Gold ETF has a better taxation as one needs to hold Gold ETF for only 1 year to be considered a long term capital gain and taxation is 10% - half of what is there for eGold. Also, one does not need to pay wealth tax.
However, eGold offers option to take physical delivery at multiple centres and option to convert it into jewellery with select and reputed jewellers.
Sir,
ReplyDeletei want to save my money in the form of gold .I have 2 lakhs now.
my requirements:
1.Highest returns without taxes
2.This is not for jewellery making at the end...only to earn higher returns
3.I want to invest for 1 to 2 years and above....not for immediate use.
Thank you.Waiting for your reply.
Thanks for your comment. Highest return would be from eGold. But you should consider taxes as well.. Have a read of the post.
ReplyDelete