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Topic - Physical Gold v/s Digital Gold v/s Gold ETF v/s Sovereign Gold Bond (SGB)
(Thread) – DO RE-TWEET FOR A LARGER REACH :)
(1/n)
Topic - Physical Gold v/s Digital Gold v/s Gold ETF v/s Sovereign Gold Bond (SGB)
(Thread) – DO RE-TWEET FOR A LARGER REACH :)
(1/n)
(1) Physical Gold – Buying gold from your friendly jeweler or bank
(a) Pro
(i) Tangible (You can touch it)
(ii) Buy in cash, confidentiality, difficult to trace
(iii) No maximum limit on buying
(iv) Highly Liquid
(2/n)
(a) Pro
(i) Tangible (You can touch it)
(ii) Buy in cash, confidentiality, difficult to trace
(iii) No maximum limit on buying
(iv) Highly Liquid
(2/n)
(b) Cons
(i) Storage/Theft
(ii) Purity (Cheating)
(iii) Making Charges (upto 35%)
(iv) Taxation vs SGB
(v) GST – 3% on selling gold
(vi) Inconsistency of pricing across sellers & spread vs traded gold
(vii) No regulator
(3/n)
(i) Storage/Theft
(ii) Purity (Cheating)
(iii) Making Charges (upto 35%)
(iv) Taxation vs SGB
(v) GST – 3% on selling gold
(vi) Inconsistency of pricing across sellers & spread vs traded gold
(vii) No regulator
(3/n)
(c) Taxation
(i) STCG – Less than 3 years, added to your over-all income and taxed at slab rates
(ii) LTCG – More than 3 years, 20% tax with indexation advantage
(d) Suggestion – Avoid
(4/n)
(i) STCG – Less than 3 years, added to your over-all income and taxed at slab rates
(ii) LTCG – More than 3 years, 20% tax with indexation advantage
(d) Suggestion – Avoid
(4/n)
(2) Digital Gold – Buying from Fintech platforms – PayTM, Google Pay, Phone Pay, Safegold, MMTC, Augmont Gold
(a) Pro
(i) Buy as low as Re. 1
(ii) Purity – Generally wont be a problem
(iii) Storage – You don’t have to bother
(iv) Instant credit on selling
(5/n)
(a) Pro
(i) Buy as low as Re. 1
(ii) Purity – Generally wont be a problem
(iii) Storage – You don’t have to bother
(iv) Instant credit on selling
(5/n)
(b) Cons
(i) GST – 3% (You buy 1000 rupees of gold, you get 970 worth of gold)
(ii) Spread – High difference between buy and sell price (another 2-3% for storage, insurance & trustee fees)
(ii) Absence of regulator
.... Cons continued (6/n)
(i) GST – 3% (You buy 1000 rupees of gold, you get 970 worth of gold)
(ii) Spread – High difference between buy and sell price (another 2-3% for storage, insurance & trustee fees)
(ii) Absence of regulator
.... Cons continued (6/n)
(iv) Maximum holding period – Ex - MMTC investors will have 2 mandatorily take delivery or sell the gold purchased after 5 years or will have 2 pay extra charges, if the delivery is not taken
(v) Taxation vs SGB
(c) Taxation – Same as Physical Gold
(d) Suggestion – Avoid (7/n)
(v) Taxation vs SGB
(c) Taxation – Same as Physical Gold
(d) Suggestion – Avoid (7/n)
(3) Gold ETF – Buying through Mutual Funds
(a) Pro
(i) Buying at fair value (market value, no spread)
(ii) Minimum – Rs. 50 & Maximum – No limit
(iii) Storage – You don’t have to bother
(iv) Purity
(v) No GST – indirectly (input credit)
(vi) Physical delivery possible (8/n)
(a) Pro
(i) Buying at fair value (market value, no spread)
(ii) Minimum – Rs. 50 & Maximum – No limit
(iii) Storage – You don’t have to bother
(iv) Purity
(v) No GST – indirectly (input credit)
(vi) Physical delivery possible (8/n)
Pros continued ...
(vii) Liquidity – T+1
(viii) Regulator - SEBI
(b) Con
(i) Taxation vs SGB
(ii) Tracking error
(iii) Expense ratio
(c) Taxation – Same as Physical Gold
(d) Suggestion – Better than Physical & Digital gold (9/n)
(vii) Liquidity – T+1
(viii) Regulator - SEBI
(b) Con
(i) Taxation vs SGB
(ii) Tracking error
(iii) Expense ratio
(c) Taxation – Same as Physical Gold
(d) Suggestion – Better than Physical & Digital gold (9/n)
(4) Sovereign Gold Bond (SGB) – Buying through RBI on behalf of the central government
(a) Pro
(i) Issued at a discount to the current market price
(ii) Storage – You don’t have to bother
(iii) No GST (10/n)
(a) Pro
(i) Issued at a discount to the current market price
(ii) Storage – You don’t have to bother
(iii) No GST (10/n)
Pros continued,
(v) 2.5% interest paid by the government, over and above the capital gains
(vi) Taxation – No capital gains tax. 2.5% interest is taxed at the slab rates
(viii) Sovereign guarantee (11/n)
(v) 2.5% interest paid by the government, over and above the capital gains
(vi) Taxation – No capital gains tax. 2.5% interest is taxed at the slab rates
(viii) Sovereign guarantee (11/n)
(b) Con
(i) Not backed by physical gold purchase unlike in digital gold & ETF where gold is actually bought. But there is sovereign guarantee.
(ii) Minimum – 1 gram, Max – 4 Kgs
(iii) No physical delivery (12/n)
(i) Not backed by physical gold purchase unlike in digital gold & ETF where gold is actually bought. But there is sovereign guarantee.
(ii) Minimum – 1 gram, Max – 4 Kgs
(iii) No physical delivery (12/n)
Cons continued,
(iv) Liquidity – Its an 8 year product. If you want to sell before 5 years, your selling price is secondary market determined which can be at a discount & there have been multiple such instances in the past (13/14)
(iv) Liquidity – Its an 8 year product. If you want to sell before 5 years, your selling price is secondary market determined which can be at a discount & there have been multiple such instances in the past (13/14)
Suggestion–If u can buy/sell 4m the secondary markets, this is the best product 2 invest in or else u have 2 mandatorily buy when the new issue comes & @ that price which is not always great & lock-in for 5 years. If secondary markets/timing r nt, ur thing, consider gold ETF’s
My dear friend @stepbystep888 has written a very detailed and an analytical piece on the same (specially SGB), will share the link in a bit. Go follow him! (**END**)
Heres the link to the detailed article on the same - https://fpa.edu.in/blog/gold
Link to the article - https://fpa.edu.in/blog/physical-gold-vs-digital-gold-vs-gold-etf-vs-sovereign-gold-bonds
