It's an age-old tradition in India to buy to gold on Dhanteras. The goddess of wealth Lakshmi is worshiped for financial prosperity. Hindus consider it as an extremely auspicious day to make new purchases, especially gold or silver articles and new utensils. It is believed that new "Dhan" (wealth) or some form of precious metal is a sign of good luck.
Indian households collectively, are estimated to have close to 24,000 tonnes of gold, which as per current price is valued in excess of Rs 7.87 lakh crore. Essentially, most of this gold is in physical form, which is a reason to fear as all physical things are prone to theft. Gold purity is also a concern in case of non-hallmarked jewellery.
Disadvantages of physical gold
Physical gold needs storage, buyers of gold either keep their stash in safes at home, or in lockers at banks. Either way it is vulnerable to theft and also has a storage cost associated with it.Some people keep gold as a hedge against economic crises. But a thing to consider is, who will buy physical gold when everyone is cash deprived?
Many buy gold during the festive season in the form of jewellery. It comes with making charges which further escalates the cost. Gold buyers can instead opt for gold bonds to overcome the shortcomings of physical gold.
Advantages of Digital Gold
If held in de-materialised form, there is mental peace as there is no worry of it being stolen. Moreover tax arising on capital gains is also exempted. Sovereign gold bond scheme also offers interest at the rate of 2.50 per cent on the initial investment in gold bonds. Also, there is no restriction on the minimum quantity, you can start with an investment of only Re 1.
At present there are various options to buy gold digitally. The most common amongst them are 'Digital Gold', offered on mobile wallet platform Paytm and 'GoldRush' offered by Stock Holding Corporation of India. Both are offered in association with MMTC - PAMP which is a joint venture between Govt. of India undertaking (MMTC) and Switzerland-based bullion brand PAMP SA.
Other investment alternatives
Apart from investment in gold this festive season, investors can also consider other lucrative options.
Stock markets have witnessed a recent corrections and many stocks have fallen by more than 40 per cent since their August peak, these can be good investment if held for some time before selling.
As per a recent development, SEBI has approved REITs in India. REIT stands for real estate investment trust. With the advent of REITs in India, small investors that cannot buy high priced real estate can earn through appreciation in real estate prices. This can be done by investing small amounts through SIP just as in mutual funds, which are pooled and invested in real estate by REIT. The capital appreciation earned by REIT would be distributed as dividend to small investors.
If the goal is to invest for long term then mutual fund is the best alternative as it could give exponential returns. Also investment in mutual funds can be customised as per the risk appetite of the investor such as equity mutual funds for young investors and debt mutual funds for aged investors.