Gold has long been cherished as a symbol of wealth and a reliable investment avenue. In today’s digital age, platforms like Zerodha have made investing in gold more accessible and convenient. This guide delves into the various methods of investing in gold through Zerodha, offering insights into each avenue to help you make informed decisions.
Why Invest in Gold?
Before exploring the investment options, it’s essential to understand the significance of gold in an investment portfolio:
- Hedge Against Inflation: Gold often maintains its value over time, making it a safeguard against inflation.
- Portfolio Diversification: Incorporating gold can reduce overall portfolio risk due to its low correlation with other asset classes.
- Liquidity: Gold investments can be easily liquidated, providing flexibility to investors.
- Cultural Significance: In countries like India, gold holds cultural and traditional importance, further enhancing its value proposition.
Investment Avenues for Gold in Zerodha
Zerodha offers multiple channels to invest in gold, each catering to different investment preferences and objectives.
1. Sovereign Gold Bonds (SGBs)
Overview: Sovereign Gold Bonds are government securities issued by the Reserve Bank of India (RBI) that offer an alternative to holding physical gold. These bonds are denominated in grams of gold and have a tenure of eight years, with an option to exit after the fifth year.
Key Features:
- Interest Earnings: Investors earn a fixed annual interest of 2.5% on the initial investment amount, credited semi-annually to their bank accounts.
- Tax Benefits: No capital gains tax if held until maturity. However, interest earned is taxable as per the investor’s income slab.
- Safety: Being government-backed, SGBs carry minimal risk and eliminate issues related to storage and purity associated with physical gold.
How to Invest in SGBs through Zerodha:
- Accessing the Platform: Log in to your Zerodha Kite account.
- Navigating to Bids: Click on ‘Bids’ in the main menu.
- Selecting Government Securities: Choose ‘Govt. Securities’ from the dropdown.
- Placing a Bid: Click on ‘Place bid’ next to the active SGB issue, enter the desired investment amount, and confirm your order.
Note: SGBs are available for subscription during specific issuance windows announced by the RBI. Ensure to check these periods to participate in the primary market. Additionally, SGBs can be traded in the secondary market through Zerodha, offering flexibility for investors looking to buy or sell before maturity.
For a detailed guide, refer to Zerodha’s official announcement on investing in SGBs: Invest in Sovereign Gold Bonds.
2. Gold Exchange-Traded Funds (ETFs)
Overview: Gold ETFs are mutual fund schemes that invest in physical gold. They combine the flexibility of stock investment with the simplicity of gold investments.
Key Features:
- Trading: Gold ETFs are listed and traded on stock exchanges, allowing investors to buy or sell units at market prices during trading hours.
- Purity Assurance: Investments are backed by physical gold of high purity, ensuring quality.
- No Entry/Exit Loads: Typically, there are no entry or exit loads, but brokerage and other transaction charges may apply.
How to Invest in Gold ETFs through Zerodha:
- Market Watch: Log in to your Zerodha Kite account and add the desired Gold ETF to your market watch by entering the ETF’s ticker symbol.
- Placing an Order: Click on the ETF in your market watch, select ‘Buy’, enter the quantity, and place the order.
Example: Zerodha offers its own Gold ETF, the Zerodha Gold ETF, which aims to track the performance of gold. Investors can start with amounts as low as ₹10 once listed.
For more information on the Zerodha Gold ETF, visit: Zerodha Gold ETF.
MUST READ: Best Investment Options in India with High Returns In 2025
3. Gold Futures
Overview: Gold futures are derivative contracts where investors agree to buy or sell a specific quantity of gold at a predetermined price on a future date. This avenue is suitable for investors looking to speculate on gold price movements rather than long-term investment.
Key Features:
- Leverage: Allows investors to take larger positions with a smaller capital outlay.
- Liquidity: Gold futures contracts are highly liquid, facilitating easy entry and exit.
- Risk: Due to leverage, the potential for both gains and losses is amplified.
How to Trade Gold Futures through Zerodha:
- Commodity Account Activation: Ensure your Zerodha account is enabled for commodity trading. If not, you can activate it by submitting the necessary documents through the Zerodha console.
- Market Watch: Add the desired gold futures contract to your market watch on Zerodha Kite.
- Placing an Order: Click on the contract, select ‘Buy’ or ‘Sell’ based on your market outlook, enter the quantity, and place the order.
Note: Trading in futures requires a good understanding of the market and involves significant risk. It’s advisable to gain adequate knowledge or consult a financial advisor before engaging in futures trading.
For a comprehensive understanding of gold futures trading, refer to Zerodha’s educational module: Gold (Part 1) – Varsity by Zerodha.
4. Digital Gold
Overview: Digital gold allows investors to purchase gold online in fractional quantities, which is stored securely by the service provider. While Zerodha doesn’t directly offer digital gold, investors can explore this option through other platforms if they prefer owning gold in smaller denominations without physical possession.
Key Features:
- Flexibility: Purchase gold in small quantities, even as low as 1 gram.
- Storage: The purchased gold is stored securely by the provider, eliminating storage concerns for the investor.
- Liquidity: Investors can sell their digital gold back to the provider at prevailing market rates.
Note: While digital gold offers convenience, it’s essential to choose reputable providers to ensure the safety and authenticity of your investment.
Comparing Gold Investment Options
Understanding the nuances of each investment avenue can help in making an informed decision. Here’s a comparative overview:
| Feature | Sovereign Gold Bonds (SGBs) | Gold ETFs | Gold Futures | Digital Gold |
|---|---|---|---|---|
| Tenure | 8 years (exit option after 5 years) | No fixed tenure | Specific contract periods | No fixed tenure |
| Returns | Linked to gold price + 2.5% annual interest | Linked to gold price | Based on price movements | Linked to gold price |
| Taxation | No capital gains tax if held till maturity; | It depend on various factors |
It depend on various factors |
It depend on various factors |