Every Indian prefers to have some investment in Gold, but they are scared of various types of expenses and unfair market prices. Therefore, for such investors, Digital Gold and Gold ETFs are the best investment option.
In today’s blog post, we will give you an overview of Digital Gold and Gold ETFs, along with the differences and tell you which one is suitable for you.
Meaning of Digital Gold
Digital Gold is a modern and innovative way to invest in Gold. One can invest in this through an online platform. However, one is not required to hold the Gold in physical form. It allows you to buy small quantities of Gold through various online platforms. Whenever one makes a payment, an equivalent amount of physical Gold is stored in vaults by the provider. Whenever you want to receive physical gold delivery, you can have it delivered to your doorstep.
Features of Digital Gold
The key features of Digital Gold are as follows:
- Backed by Physical Gold: Each unit purchased by the investor is backed by physical Gold.
- Physical Gold: The units of digital Gold can easily be converted into physical Gold at the market rate.
- Zero Making Charges: There will be zero making charges, unlike any jewellery.
- Small Investment: One can do a fractional investment in digital Gold.
Meaning of Gold ETF
A Gold ETF or Gold Exchange Traded Fund is a category of mutual fund that primarily invests in physical Gold with a purity of 99.5%. Gold ETFs are traded on the stock exchange like any other stock. It tracks the domestic price of Gold and can be liquidated at any time during the market hours. Each unit of an ETF represents a specific amount of physical Gold.
Features of Gold ETF
The key features of Gold ETF are as follows:
- Traded on Exchange: Gold ETFs are traded on the stock exchange like any other ordinary stock.
- Lower Expense Ratio: The expense ratio of the Gold ETF is comparatively much less than any other form of digital Gold.
- Brokerage Charges: One is required to pay brokerage charges on the Gold purchased from the exchange.
- Demat and Trading Account: If you wish to invest in a Gold ETF, you are required to open a demat and trading account with a broker.
Read Also: Gold ETF vs Gold Mutual Fund: Differences and Similarities
Difference Between Digital Gold and Gold ETF
The key differences between Digital Gold and Gold ETF are as follows:
| Particulars | Digital Gold | Gold ETF |
|---|---|---|
| Meaning | Your investment in digital Gold is stored in a secure vault. | Your ETF units invest in physical Gold. |
| Application | It can be bought and sold on multiple platforms. | It can only be bought and sold through the Stock Exchange. |
| Regulations | There are no defined regulations related to digital Gold. | Gold ETFs are strictly regulated by SEBI. |
| Liquidity | One can invest in it anytime. There is no fixed time regarding the investment in Digital Gold. | Investment in an ETF can only be made during the market trading hours. |
| Cost | It generally has a higher cost. | It has a comparatively lower cost than digital Gold. |
| Suitability | Digital Gold is suitable for investors who do not have a demat account. | Investors who are familiar with the stock market and have a demat and trading account can consider investment in Gold ETFs. |
| Convertibility | They can be converted into physical Gold. | Gold ETFs cannot be converted into physical Gold. |
| Storage | The units of physical Gold are stored in vaults by the service provider. | They are held electronically in the investor’s demat account. |
Which is Better for You
Choosing between Digital Gold and Gold ETFs depends on the investment objective of the investor. For a new investor who wishes to have physical Gold, Digital Gold can be a better option as one can invest with INR 1, and does not require to have a demat and trading account. On the other hand, if you are a long-term investor seeking to create wealth over time and have a demat and trading account, you may consider investing in Gold ETFs.
Read Also: SBI Gold ETF vs HDFC Gold ETF: Where To Invest?
Conclusion
On a concluding note, both digital Gold and Gold ETFs provide you with an opportunity to create wealth by getting the benefit of appreciation in Gold prices. Digital Gold is suitable for new investors who want a straightforward investment experience in Gold. Whereas, on the other hand, investors who are well versed with the concept of trading in stocks can invest in Gold through ETFs. However, both of them carry certain risks, and the allocation of Gold depends on the individual’s investment goal. Therefore, it is advisable to consult your investment advisor before making any investment decision.
Frequently Asked Questions (FAQs)
Can I convert a Gold ETF into physical Gold?
No, you cannot convert a Gold ETF into physical Gold; only digital Gold can be converted into physical Gold.
How can I invest in a Gold ETF?
You can invest in a Gold ETF through a demat and trading account, as they are traded on the stock exchange. One can easily open a lifetime free demat account with Pocketful and invest in a Gold ETF.
What is the minimum investment amount in Digital Gold and Gold ETFs?
One can invest as little as INR 1 in digital Gold. However, the investment amount depends on the platform through which you are investing. Whereas in the Gold ETF, the minimum investment amount depends on the unit price of the ETF.
Which offers higher liquidity between Digital Gold and Gold ETF?
Digital Gold can be bought and sold at any time, whereas the Gold ETF can be traded during market hours.
Can an NRI invest in Digital Gold and Gold ETF?
Yes, an NRI can invest in Gold ETF through their NRO or NRI Demat account, while investment in Digital Gold by an NRI depends on the rules specified by the platform.
