GOLD SAVINGS FUND
What is it?
Bullion – coins, bars, usually in standard weights, 5 gm, 10 gm, 50 gm, etc.
Rings, bracelets, bangles, ear-rings, necklaces etc. If you are an Indian I don’t need to explain this! Usually jewellery will not be as pure as bullion. It will be 22 karat (91.67% purity) or less. Until you do a purity test on the jewellery, you have to go by the jeweler’s word on purity.
A fund which puts investor money in physical gold, usually 1 kg bars
A fund which puts investor money usually in the same fund-house’s ETF scheme. For ETF read adjacent point.
Purity of gold
99.5% or 99.9% (24 karat) purity is usually available. But until you do a purity test on the bullion, you have to go by the jeweler’s or bank’s word on purity.
Usually of 99.5% purity
No concept of direct measurement of purity since the savings fund does not hold gold. It will depend in turn on the ETF they have invested in. Read adjacent point.
Where do you buy it?
Exchange – BSE, NSE
Mutual funds – online or directly or through their agents. Yes
Systematic Investment Plan availability
Usually. safe deposit box for storage. No entry load. in all.
Management fee charged by the fund-house.
Does not need a demat account. banks have higher prices as compared to jewellers)
Apart from the premium mentioned in the adjacent point. accessible to more investors who do not have a demat account.
Entry load charged by fund-house.
Management fee charged by the fund-house. Usually 1% of amount held. SEBI says ETFs cannot charge more than 1.
Broking commission charged by your broker when you buy on exchange.
Needs a locker.5% a year. safe deposit box for storage. This is highest because they charge in addition to what the underlying ETF scheme charges. (Usually 46%.
Entry charges (other than basic gold purchase price)
Premium charged by jewellers and banks.5% a year
. there are making charges which are dependent on jeweller you purchase from and also how intricate the jewellery is.PHYSICAL GOLDBULLION
GOLD SAVINGS FUND
How do you store or maintain it?
Needs a locker. not more than 1.
Gold is held on your behalf in storage vaults and is audited at periodic intervals. Needs a demat account.
Short term capital gains added to income tax. Short term capital gains added to income tax.
Usually. tax calculation as per slab you fall under
10% long-term capital gains without indexation.PHYSICAL GOLDBULLION
GOLD SAVINGS FUND
Jewellers will deduct around 37% as charges from the buying price on that day. 1.
Broking commission charged by your broker when you sell on exchange. Reasonably immune from any financial market problems. they only sell it. jewellers will buy back jewellery. You will get cash by exchange settlement which will take a couple of days (T+2).5-2% exit load if you sell before one year.
Most mutual funds houses will have T+2 settlement. Banks do not buy back bullion. Reasonably immune from any financial market problems. jewellers will buy back bullion. tax calculation as per slab you fall under
. tax calculation as per slab you fall under
10% long-term capital gains without indexation. different ETFs have different daily trading volumes. tax calculation as per slab you fall under
10% long-term capital gains without indexation.
Jewellery is usually of lower purity. Low volumes might give you a slightly unattractive price. Short term capital gains added to income tax. No exit load. 20% long term capital gains tax with indexation.
Ease of selling
Usually. 20% long term capital gains tax with indexation. 20% long term capital gains tax with indexation. Ability to sell – dependent on exchanges.
Capital gains treatment Long term
10% long-term capital gains without indexation. Also will have higher deductions on selling.
Capital gains treatment – short term
Short term capital gains added to income tax. In India jewellery has a fairly liquid market for selling. 20% long term capital gains tax with indexation. In India bullion has a liquid market for selling.
It is also a culturally accepted gift for a newborn. You may need physical gold. 1. 30 lakh.
Physical gold investment
. I have listed the factors below for the respective gold investment options. 30 lakh. gold has a societal function in certain events in life. You will have to take a decision based on your needs for liquidity. bullion is added to assets liable for wealth tax. 2.
Short term – Less than 3 year Long term – More than 3 year 1% a year for excess wealth over Rs.
Short term – Less than 1 year Long term – More than 1 year No wealth tax
Short term – Less than 1 year Long term – More than 1 year No wealth tax
Which gold investment option is best?
I have deliberately avoided talking of two options.PHYSICAL GOLDBULLION
GOLD SAVINGS FUND
Definition of short term and long term
Short term – Less than 3 year Long term – More than 3 year 1% a year for excess wealth over Rs. Mutual funds which invest in stocks of gold mining companies around the world – They carry equity market risk and are not direct gold investment options. Even otherwise gold is a part of investments in most Indian households. jewellery is added to assets liable for wealth tax. National Spot Exchange – E-gold – You need a separate trading account even if you have a demat account already. a prime example being marriage of a daughter. costs and comfort with respective options.
Many people might not even know that they have a wealth tax liability. To see examples click on the links below. You will see that almost all of them have similar returns. Benchmark Gold ETF Reliance Gold ETF
. the biggest question is whether you have a safe storage option.
You can get physical gold checked for purity. Gold ETF If you have a demat account already. You might ask which ETF to choose? To see all the gold ETFs available in the market and their returns. In many cases. click here. it might be undeclared wealth too. The Bureau of Indian Standards (BIS) has recognized hallmarking centres in various cities. There is not much difference in returns across the gold ETFs in India. That is their core function. this is an easy route. you will have to seriously consider where to keep your gold safely. It is better if the difference between buy and sell prices is least and there are adequate offers on either side of the table.
Most Gold ETFs have decent liquidity on the exchange. I should remind you that you will need to see them between market hours to see the buy and sell prices table. The key thing to look for is the difference between the buy and sell offers.
Gold ETFs should do nothing more than track the price of gold.For physical gold investments.
The second question is whether you come under the wealth tax net with the gold you possess. If you have no locker facility. Click this link for list of BIS approved hallmarking centres for gold in India.
as I mentioned for gold ETFs. Keep in mind that management fee also is applicable in gold savings funds. You don’t have to worry about exit load and entry load in gold ETFs. Its your money. You will have to take a pick based on limited returns history. If you visited the link above you will have seen that: 1. It does not take much time. Here there is a difference between gold ETFs and gold savings funds. Every Mutual fund (MF) website has the details. gold savings funds should do nothing more than track the price of gold.
Again. please go through the scheme details. 3.
For the paranoid
. Gold savings funds are a relatively new financial product in India. Many people skip this and find they have signed up for a scheme that has higher expenses. It is a game of chance in choosing the right gold savings fund because there is no longterm track record. click here. Make the effort and consider less expensive funds with lesser management fee. A cursory 10 minute website browsing exercise showed me exit load range of 1. There is wide variation in returns across different funds.
Similar to gold ETFs. after all!
Gold Savings Funds
To see all the gold ETFs available in the market.5-2% for selling before 1 year. across different gold saving funds. 2. It takes 5 minutes.Expenses
Please go through the scheme details. Sufficient track record not present – only 1 year and less is available.
You can similarly try calculating the purity for 18 karat. the financial system makes it far easier than in 1933. Helpful information Article on Physical gold purity problems in India. Records of ownership of assets is present in information systems. Get free updates by email!
. 22 divided by 24 = 91.Gold is a sensitive subject for governments and central banks.9% purity of gold. Let me tell you what Executive Order 6102 meant for US citizens in 1933.
I urge you to read the disclaimer. The price of gold was subsequently raised by the government to $35. Citizens were asked to sell gold to the government at around $20. It was an assault on citizen rights and done by an elected government in the USA. At a basic level. Definition of “assets” under Wealth Tax Act can be understood at this link.They are carried out by the mutual fund house to ascertain that the gold is indeed of the purity expected. It outlawed private possession of gold bullion beyond a certain allowed limit. Karat – 22 karat means. It can be considered by citizens as a barometer of abuse of money supply by the powers that run a country. physical gold is safer than ETFs and gold savings funds if you contemplate extreme situations. Click this link.67% purity.
Don't miss new articles. Purity tests by MFs.
If it ever came to seizing assets of citizens today under any justification. 22 out of 24 parts is pure gold. That was a straight loss of 75% ((35 minus 20) divided by 20) to gold holders It might seem fantastic to you but its true. See this link to go through an example of a purity test. 24 karat usually means 99. Transactions are recorded electronically. All systems are centralized. There have been precedents in the past where private gold ownership has been subjected to harsh treatment.
physical bullion (not jewelry) is a more attractive option than an ETF.Email Address
Rate this article and tell me how useful it is to you. and not from a jeweler in a fancy mall or MMTC or a bank. I think buying bullion from an efficient market like Chandni Chowk is the best way to buy and hold gold. 2012 . investment. 2012 .8/10 (5 votes cast)
How can you make safe debt investments? Religare Finvest NCD – Should you invest? Diamonds as an investment . gold bar. the buy-sell spread is likely to be around 1% (it is not fixed. The new-age banks are especially worst in the amount of spread they charge over the day’s gold rate. while the buy-sell spread in an ETF over 3 years will be around 4% (1% brokerage plus 1% fund expense charge every year). It is safe too. physical gold
SEPTEMBER 6. gold ETF. and there are also independent weigh-bridges where you can get the weight verified ( costs Rs 5 per weighing). gold savings fund. Your feedback is important! Rating: 9. but not if the purchase amount is substantial). provided the purchase is done from a wholesale-like bullion market like Chandni Chowk in Delhi.
SEPTEMBER 6. that would be a significant percentage cost if the purchase amount is small. In a place like Chandni Chowk.
. varies every day). There are labs in Chandni Chowk where you can get the purity checked ( costs Rs 25 or so per test. but the actual cost comes to about Rs 100-200 per test because a minuscule amount of metal is lost in the process. Ditto about the buying from reputed jeweller part.6:42 PMKunal
I agree with you Anil with the physical over ETF argument when costs are included. gold coin.does it make sense?
Written byKunal Pawaskar Posted in Personal Finance Tagged with gold.5:24 PMAnil
For a holding period of 3 years and above.
Can you do a post on it? I’m just an 18-y old student interested in investing long term (just for a nest egg). e. I do not know if they still have a free offer going for anyone to walk in and check their gold purity. Practically. In Mumbai. I had got a free non-invasive test by an X ray spectrometer (if I remember the device right) from the Tanishq store when they had a free offer. Gold has properties that satisfy the requirements of money. Sudden additions/reductions to the stock of gold in the system are avoided as a result. The transactional elements in our cultural events like gold transfers via dowry. silver has been used in the past as money. I was not aware of it since I am from Mumbai. 2012 . gifts etc. I am not completely confident of the case for silver vs. Silver on the other hand does have industrial uses. So.The testing labs in Chandni Chowk information is useful. Still. But readers in Delhi will surely benefit from this.8:43 PMKunal
Hi Ganesh. I’m new to investing but I can understand most of what you explain. bodes well for its use as money. One of the more important ones is that it does not have alternative industrial uses. gold.2:53 PMGanesh
@Kunal – Do you recommend buying silver bullion? Considering how it is much cheaper than gold and it’s value has risen considerably over the past years. compactness etc. Like I read somewhere. are nothing but value transfers. the fact that gold is not used to a great extent anywhere else. divisibility. In fact you could google up bimetallism and see the big debate in the
. there are questions whether it can be a good store of value.g durability.
OCTOBER 24. Thanks for the info!
OCTOBER 21. 2012 . all the jewellery that Indians use is actually wealth or a store of value.
I will work on a post in the near future.US over the the 19th and 20th century over the use of gold vs.will be kept a secret) Comment
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