E-gold, gold plans or ETFs: What is best for your finances?

Last Updated: Mon, Dec 10, 2012 03:53 hrs

pAnuja J a 26-year-old Mumbai resident started investing in a gold scheme offered by a leading jeweller in the city one and half years ago The investment was Rs 3000 a month Her motive was to buy jewellery for her marriage After 18 months Anuja&rsquos investment grew to Rs 60000 including the jeweller&rsquos contribution which she wanted to redeemppHowever Anuja wasn&rsquot happy with the money accumulated at the end of the tenure of her scheme Reason When she enrolled on April 29 2011 the gold price was Rs 22145 for 10 gms which shot up to Rs 30955 by October 31 2012 In other words a piece of gold jewellery that would cost Rs 1 lakh then is now costing her Rs 140000 Hence her scheme became unattractive when prices moved upppTanishq Tribhovandas Bhimji Zaveri Popley Jewellers Gitanjali and Chennai&rsquos GRT are among many jewellers offering &ldquogold saving schemes&rdquo Investors&rsquo savings are used by jewellers to cover their operating expenses and carry out the company&rsquos normal business activitiesppIs this a good investment option No say experts This is not the right way to invest in gold because the jewellers don&rsquot buy gold on your behalf but just accumulate your moneyppOn the other hand the gold plan launched by Reliance Money Precious Metals Pvt Ltd a Reliance Capital company in tie-up with the World Gold Council WGC accumulates physical gold using a daily average pricing methodology It splits the monthly investment into equal parts and allots gold grammes over 20 successive working daysppAmresh Acharya director-investments at World Gold Council says &ldquoThis works as a mutual fund SIP systematic investment plan where the customer gets the statement of holding on a daily basis detailing the amount of gold accumulated and the purchase price&rdquoppThe minimum investible amount is Rs 1000 and one can stay invested up to 15 years However the company levies a 15 per cent charge on monthly subscription For instance if your monthly investment is Rs 5000 then Rs 4925 only gets invested while Rs 75 goes towards storage and other administrative costs Second a 25 per cent pre-maturity charge is levied if the plan is withdrawn within six monthsppIf you are looking at investing in gold through an electronic form other options are available For instance along with the Reliance plan you could weigh gold exchange traded funds ETFs e-gold and gold fund of fundsppCurrently 12 fund houses are offering gold ETFs These are passively managed funds that track gold prices Gold ETFs are a cheaper proposition as there is no entry or exit load on it However there is a brokerage feebr br table cellpadding2 width591 tbody tr styleheight 15pt height20 td styleheight 15pt width563 bgcolorccd7dd colspan5 height20font size2strongALL THAT GLITTERSstrongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolor95acb3 height20font colorffffff size2strongParameter strongfonttd td width106 bgcolor95acb3font colorffffff size2strongFund of funds strongfonttd td width127 bgcolor95acb3font colorffffff size2strongGold ETFs strongfonttd td width95 bgcolor95acb3font colorffffff size2strongE-gold strongfonttd td width151 bgcolor95acb3font colorffffff size2strongJeweller strongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2Mode of holding fonttd td width106 bgcolorccd7ddfont size2Mutual fund fonttd td width127 bgcolorccd7ddfont size2Demat fonttd td width95 bgcolorccd7ddfont size2Demat fonttd td width151 bgcolorccd7ddfont size2Physical coinbar fonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2Pricing fonttd td width106 bgcolorccd7ddfont size2Spot price fonttd td width127 bgcolorccd7ddfont size2Spot price fonttd td width95 bgcolorccd7ddfont size2Spot price fonttd td width151 bgcolorccd7ddfont size2Differs fonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2Purity fonttd td width106 bgcolorccd7ddfont size2High fonttd td alignleft width127 bgcolorccd7ddfont size29950fonttd td alignleft width95 bgcolorccd7ddfont size29999fonttd td width151 bgcolorccd7ddfont size2Cant say fonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2Wealth Tax fonttd td width106 bgcolorccd7ddfont size2No fonttd td width127 bgcolorccd7ddfont size2No fonttd td width95 bgcolorccd7ddfont size2Yes fonttd td width151 bgcolorccd7ddfont size2Yes fonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2LTCG  fonttd td width106 bgcolorccd7ddfont size2After 3 years fonttd td width127 bgcolorccd7ddfont size2Indexation benefits br after one yearfonttd td width95 bgcolorccd7ddfont size2After 3 years fonttd td width151 bgcolorccd7ddfont size2Indexation benefitsbr after one yearfonttd tr tr styleheight 15pt height20 td styleheight 15pt width100 bgcolorccd7dd height20font size2Liquidity fonttd td width106 bgcolorccd7ddfont size2High fonttd td width127 bgcolorccd7ddfont size2High fonttd td width95 bgcolorccd7ddfont size2High fonttd td width151 bgcolorccd7ddfont size2Relatively at high costfonttd tr tbodytableppYou can also consider the fund of funds route Although there are no brokerages you will have to bear the exit load Gold ETFs and fund of funds use spot gold prices and investments in these can be made through an SIPppIn e-gold you can buy in units One e-gold unit is equal to one gramme of gold which can be bought and sold via the spot exchange just like shares making it a very liquid investment While investment in e-gold needs a demat account one can invest in a gold ETF without a demat accountppWhile a fund house will give physical delivery of gold only if the quantity is around one kg upon redemption of the ETF units in the Reliance plan one can redeem one&rsquos accumulated gold gramme into 24-carat gold coinsbars While gold ETFs and fund of funds are considered more as paper gold investments e-gold is more liquid in natureppRajiv Goel a financial planner said e-gold is the most cost-effective form and is able to trace gold prices more closely than ETFs or gold funds &ldquoHowever e-gold loses out to gold ETFs when it comes to taxation as the units need to be held for more than three years to get long-term capital gains tax benefit unlike gold ETFs that need to be held only for one year Also one might have to pay s wealth tax on e-gold unlike ETFs or gold fund&rdquop

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