Last Update:29 October 2024 11:42 IST

The rise of digital gold creates new investment avenues.

Dhanteras 2024: Physical Gold, ETFs or Digital Gold, Know Which Is the Right Choice for Your Portfolio

In India, gold is much more than a commodity; It is a symbol of wealth, security and tradition. Amid global economic changes and evolving investment environments, gold remains a popular choice, but modern investors are no longer Options beyond physical gold. As options such as gold ETFs and digital gold gain traction, investors are now evaluating which form best suits their financial goals and lifestyle. FinEdge Co-Founder and COO Mayank Bhatnagar helps investors make informed decisions that balance tradition and innovation by providing insight into the strengths and challenges of each option.

(Dhanteras 2024 Best Time to Buy Gold)

The Tangibility and Tradition of Physical Gold and the Efficiency of Gold ETFs

Bhatnagar emphasizes that it is physical gold It holds significant emotional and traditional value for Indians; It is often chosen for cultural reasons and a tangible sense of ownership. But these benefits come with practical disadvantages. Storage costs, limited liquidity, and risks of theft or loss simply make it less attractive from an investment perspective.

In contrast, gold ETFs offer a digital approach. Bhatnagar points out ease of liquidity, transparency and tax efficiency. “ETFs eliminate storage concerns and provide a seamless way to incorporate gold into an asset allocation strategy,” he says.

However, unlike physical gold, ETFs lack traditional appeal and may be subject to small brokerage fees; however, these costs are generally lower than the storage costs of physical gold.

Digital Gold – A Modern Investment Frontier

Digital gold has become an increasingly popular alternative, offering easy access and flexibility through online platforms without the need for a demat account.

Bhatnagar points out that digital gold combines the accessibility of ETFs with lower barriers to entry, making it ideal for new investors. “Digital gold is safe due to regulatory oversight and, unlike ETFs, does not require a checking account. But ETFs offer higher liquidity and are more cost-effective,” he points out.

While digital gold offers unique advantages, Bhatnagar warns that it’s important to remember that gold as an asset class may not be compatible with long-term financial goals. Instead, he recommends a well-rounded investment plan that will guarantee returns that will secure wealth over time.

The Future of Gold Investments: Can Digital Gold Compete?

According to Bhatnagar, the rise of digital gold creates new investment avenues. But the cultural and emotional significance of physical gold in India is irreplaceable. ETFs, meanwhile, remain a reliable choice for those looking for a cost-effective and regulated way to include gold in their portfolios. Bhatnagar believes digital gold will complement rather than replace traditional forms and provide an accessible alternative for a more diverse approach.

Opportunities and Challenges for NRIs in Gold Investments

Gold investments provide NRIs with a diversified hedge against inflation, currency fluctuations and global uncertainties. Bhatnagar points out that NRIs can benefit from the easy availability of gold ETFs for regulated market exposure or the convenience of digital gold without the hassle of physical storage. However, he emphasizes the importance of aligning gold investments with financial goals rather than market trends, stating that “gold is ideal for hedging purposes, not as a primary investment.”

Navigating Taxation Policies on Gold Investments

The 2024 Budget brought critical changes to gold investments. Bhatnagar highlighted that the long-term capital gains (LTCG) holding period for gold has been reduced from 36 months to 24 months, while the LTCG tax rate (without indexation benefits) has been revised to 12.5%. Taxation for NRIs remains a major consideration, with a fixed TDS of 30% on capital gains. However, this can be claimed back as a tax refund when filing annually, providing some flexibility for non-resident investors.

The choice between physical gold, gold ETFs and digital gold ultimately depends on individual priorities; be it the emotional connection to physical gold, the regulatory safety of ETFs or the accessibility of digital gold. As Bhatnagar recommends, a balanced investment strategy that ensures each asset contributes meaningfully to long-term goals and wealth creation is crucial.