Buying Digital Gold Through SIPs: Is It Worth It?
Gold has been an investment favorite for gains from stability, hedging against inflation, or diversification within an asset portfolio. Traditionally, the mode for such investment was usually the purchase of physical gold, but with the advancement of many technologies, much newer modes of investment in gold have emerged. Among them, digital gold and Sovereign Gold Bonds (SGBs) are fast gaining popularity for investment in gold.
Understanding Digital Gold
Digital gold symbolizes ownership of gold deposited in secure vaults that are under short-term or long-term contracts with institutions. For instance, when an investor buys digital gold, he or she only possesses a certain amount of gold available purely in digital form, which translates into physical gold that is under the custody of a trusted institution. Thus, people are able to buy small amounts of gold without worrying about storage or purity issues. If you’re wondering how to buy digital gold, the process is simple and can be done online through trusted platforms that offer safe and regulated transactions.
The digital gold flexibility regarding how much and when transactions can be done makes it an attractive option for all types of investors. Investors are allowed to begin with a minimal amount and upscale their investment according to their financial ability and aspirations. Moreover, digital gold can be converted into physical gold or transferred to others, providing liquidity and convenience.
Buying Digital Gold
Investors can purchase digital gold easily from many online platforms or apps that offer this type of investment. Following is the process:
Register on a portal offering digital gold.
Link the payment method, like a bank account or digitized purse.
Choose the amount of gold for purchase. It could be a few grams or even fractions of a gram.
Complete the transaction; the gold is credited to the investor’s account after that.
There are some platforms which allow the gold bought to be delivered physically. However, this might cost more than the original purchase price. Digital gold is a very good substitute to physical gold purchase, especially to the investors who don’t mind having their investments paperless and easily accessible.
Introduction to Sovereign Gold Bonds
SGBs are government-managed securities that are calculated in grams of gold. This is in substitution to physical investments in gold. The investor buys SGBs at the then price marketplace prevailing at the moment of transactions and earns a specified interest on their investments, mainly on a semi-annual basis.
Typically, SGBs have a set period that usually extends to eight years, and there is an exit after the fifth year through the facility of buyback. The value of SGBs gets aligned to the market price of gold, which means that for an investment in SGBs, appreciation or depreciation occurs with respect to price fluctuations of gold. SGBs can be purchased directly online from banks, post offices, or stock exchanges, providing a regulated medium of investing in gold with no need for physical storage.
Purchase Digital Gold through SIPs
Investors will have the option to have a systematic investment plan in digital gold, which permits one to buy gold repeatedly, much like a systematic investment plan in mutual funds. This spreads the investment over a period rather than a lump sum investment, such as putting in a large investment at what may be the peak times for a particular market. Setting-up intervals of monthly or weekly contributions brings the investor to purchase gold at the market price during each interval.
SIP is a feasible way for individuals desiring consistent accumulation of gold gradually. They can shape financial habits in an individual through the SIP method by helping them accumulate a portfolio in gold gradually with no required lump sum payment upfront.
Benefits of Digital Gold SIPs
Easy Access: Small investments can be initiated by the investor into gold, thus making investment in gold available to the larger audience.
Fractional Ownership: Generally, fractional grams can be acquired under SIPs, which may not be possible with physical gold.
Portfolio Diversification: Digital gold SIPs can be incorporated in a diversified investment plan alongside equities, bonds, or mutual funds.
Convenience: Since the transactions are all digital, there will be no need to keep insuring, storing, or securing a certain amount of physical gold.
Digital Gold SIPs vs. SGBs
Both investment practices expose the investor to gold. However, each serves somewhat different purposes. Digital gold SIPs are flexible, as they provide easy investment options; SGBs are a systematic way of investing with an interest component under protection of the government. Investors would thus choose either according to their investment goals, risk appetite, and preference for liquidity or returns.
Conclusion
Modern gold investment goes beyond traditional purchasing of gold as it includes digital gold and Sovereign Gold Bonds. Systematic investing in digital gold provides an approach of saving gold over time without the headache of storing it physically. However, even though digital gold SIPs are easy to use and flexible, it is vital to understand the related costs, price volatility, and absence of interest.
