Gold has always been a trusted investment option, primarily because it offers inflation-beating returns and acts as a hedge against economic uncertainties. It holds a special place in the hearts of Indians. When we talk about investing in gold, we refer to it as a financial asset, rather than gold purchased for personal consumption, such as jewellery. While jewellery holds sentimental and aesthetic value, it may not be the most efficient form of investment due to making charges, resale deductions, and storage concerns.
For investors looking to maximize returns and liquidity, Gold Mutual Funds (GMFs) present a smarter alternative. These funds are backed by actual gold and regulated by the Securities and Exchange Board of India (SEBI), ensuring authenticity, standardisation, and transparency. Here are five key reasons why GMFs are a better investment choice than physical gold.
1. No Storage Requirement
One of the biggest challenges of owning physical gold is secure storage. Whether kept at home or in a bank locker, it requires safekeeping, which adds to costs and inconvenience. With GMFs, storage is not a concern, as they exist digitally.
2. No Risk of Impurity
Purchasing physical gold often raises concerns about purity and authenticity. GMFs eliminate these risks, as they invest in standardised, high-purity gold, giving investors peace of mind regarding quality and reliability.
3. No Threat of Theft
Physical gold is always at risk of theft, loss, or damage. Whether stored at home, in a bank locker, or worn as jewellery, it remains vulnerable to security risks. GMFs offer a safer alternative, as they exist in digital form. This removes any risk of theft or misplacement, making them a secure, worry-free investment.
4. Partial Redemption is Possible
A major limitation of physical gold is that it cannot be sold in parts. If you own `10 lakh worth of gold jewellery but need only `2 lakh, selling a portion isn't possible—you must sell the entire piece. GMFs offer flexibility, allowing investors to redeem only the required amount, keeping the rest invested. This provides greater control over one’s finances.
5. High Liquidity
Selling physical gold requires finding a buyer or jeweller at your desired price, and sometimes, they may refuse to buy during price fluctuations. Additionally, selling jewellery means deductions for making charges, leading to a lower resale value. GMFs, on the other hand, offer quick liquidity. Investors can sell units at market prices, and funds are credited to their accounts within a maximum of four working days. This ensures easy access to money whenever needed.
Final Thoughts
GMFs provide all the benefits of investing in gold without the hassles of storage, security, and purity concerns. Their high liquidity, flexibility, and digital safety make them a modern, efficient, and stress-free way to invest in gold.
(The author is a Chartered Accountant and CFA (USA). Financial Advisor.
Views personal. He could be reached on 9833133605.)
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