Digital Gold Savings Plans: Are They Worth It?
What is Digital Gold?
Digital Gold, as the name suggests, is gold in digital form. I.e. It is a financial instrument which mirrors all the financial characteristics of Gold, with actual gold being an underlying asset. To put this in simpler words, digital gold is paper gold that is backed by actual gold, and this paper gold can be bought and sold in the financial market as a financial instrument, without having to worry about holding physical gold to enjoy the returns.
Introduction
-
Brief overview of digital gold savings plans
Buying gold can be an expensive affair. Especially if someone is considering buying physical gold, they may have to shell out money based on the weight of the gold available to buy at the stores. And also, buying tangible gold involves additional costs like making charges, etc. Although Gold as a financial product has produced remarkable returns, these factors take away the convenience that other financial instruments offer.
To solve this issue, the financial institutions have come up with a plan to sell digital gold which is backed up by the actual gold. In this way, the retail investors can enjoy the price movement of the gold from investment perspective while not having to worry about the costs and convenience associated with buying tangible gold.
Plans that allow the retail investors to invest in Digital gold assets are called Digital Gold Savings Plans!
-
Growing popularity of digital gold investments
With an increased retail participation in the financial markets, various financial instruments too are growing at a rapid pace! Since Gold has always been one of the major investment avenues for a very long time, especially in India, the growth of investments made in Digital Gold assets has also grown due to the synergies between nature of the product i.e. Gold, the price growth, and stability it offers, and convenience offered in the form of ease of investment.
What are Digital Gold Savings Plans?
Digital Gold is as good of a financial instrument as any! It offers solid returns over a long investment horizon, low risk, high liquidity, among many other features which make it fit for investment. The savings plan which focuses on investment in digital gold is called a digital gold savings plan. It takes into consideration the frequency at which investment can be made into digital gold by the investor, the amount that can be invested, and the investment horizon. Based on these factors a plan is created with an aim to maximize investment and returns.
Benefits of Digital Gold Savings Plan
-
Convenience
Digital gold savings plan is highly convenient for the investors, due to the ease with which investments can be made, and withdrawn, because of a highly liquid market for digital gold. Also, the availability of several players makes it really easy for the investors to invest in digital gold assets.
-
Affordability
Due to its nature, the investor can invest as per their investment goals into digital gold assets. There is usually no minimum investment, or a cap on the maximum investment that one can make into digital gold. The fact that an investor can make investment into gold assets without having to worry about additional costs like making charges, etc. to enjoy returns on investment, make investing in digital gold assets more attractive.
-
Liquidity
Liquidity enhances the attractiveness of a financial instrument. Gold as an asset is highly liquid in nature. Historically gold has produced solid returns over a medium and long investment horizon, this can be attributed to a robust demand in the secondary market, and ever increasing demand and decreasing supply, the price of gold is expected to rise further. With digital gold, the underlying demand and other attributes are similar to that of tangible gold but with an added advantage of an enhanced secondary market with a robust and ever growing demand.
-
Security
In contrast to the popular belief, just like tangible gold, digital gold too offers security. However, it becomes even more secure to invest in gold online if one considers the security offered in the form of secured transactions, ease of storage, and highly liquid marketplace. The investor is also not susceptible to purity frauds, which makes the digital gold proposition even more attractive.
-
Transparency
One of the biggest advantages of investing in digital form of gold is the transparency it offers. Physical gold is susceptible to purity related frauds since there is no way to determine the actual purity of tangible gold assets without testing it using scientific methods. Which is not the case with digital gold. Also, the transparency related to the transaction settlement, and cash realization is another added advantage of investing in digital gold.
Risks of Digital Gold Savings Plan
-
Platform Risk
Platform risks are risks associated with the platform where the financial instruments can be traded. Hence, it is essential to invest only on trusted and legal platforms. As on such platforms, the risks get minimized, which essentially decreases the overall risks and enhances the asset returns.
-
Market Volatility
Just like any financial instrument, the price changes affect digital gold too! Market volatility i.e. sudden change in prices citing sudden increase or dip in the demand, can affect one’s digital gold savings too. To avoid losses due to such volatility events, one can plan their investments over a long time horizon.
-
Regulatory Concerns
Unlike tangible gold, where the returns are usually realized by selling tangible gold, digital assets traded over platforms and exchanges come under the purview of various regulatory authorities. A sudden change in the regulation may pose a risk to digital investment in gold, hence it is essential to take regulatory concerns into account, if you want to buy digital gold online.
Comparison:
| | PHYSICAL GOLD | DIGITAL GOLD | | :---: | ----- | ----- | | ASSOCIATED COSTS | Tangible gold usually attracts associated costs like making charges, storage charges (locker rent), stone charges, among many other | Digital gold attracts costs such as platform fee, transaction fee, which is miniscule when compared to associated costs of tangible gold | | LIQUIDITY | Tangible gold is highly liquid citing robust secondary offline market, wide range of use cases, and convertibility to different gold form | Digital Gold too is highly liquid as there are plenty of buyers on the exchanges and platforms, however the tangible gold may take the cake due to the ease | | RISKS | Tangible gold has inherent risks like purity fraud, storage risk, among many other | Digital gold has associated risks like platform risks, market volatility, and regulatory concerns among others |
Who Should Consider Digital Gold Savings Plans?
-
Ideal for small investors and those new to investments in gold
Considering the fact that digital investments in gold do not have a floor or ceiling investment limits, it makes investing into digital gold assets really attractive. As opposed to tangible gold, where an individual can only purchase gold in minimum quantities, small retail investors can greatly benefit from the flexibility offered in terms of the amount that can be invested.
-
Suitable for individuals looking for a convenient and low-barrier-to-entry investment option
Investing in gold is a no-brainer. Considering the fact that this financial product has produced stable and good returns over a long period of time, and the cultural significance it holds, a wider population sees gold as a great investment opportunity. It requires little to no past investment experience, and can be a great addition to the existing portfolio
-
Not recommended for those looking for long-term physical gold ownership
Although there are a lot of similarities between physical and digital gold in terms of the returns produced over long terms, however the digital gold is more of a financial product which does not offer the sentiment value that tangible gold offers. Hence it may not be fit for buyers who want to do a gold purchase for both investment and cultural reasons. However, investors with sole motivation of producing good returns over long investment horizons can invest in digital gold assets without much contemplation.
Conclusion
Digital gold has been a pretty innovative way through which investors have been able to gain exposure to gold without having to face the complexities of buying and storing physical gold. Digital Gold represents a financial instrument, backed by real gold, wherein investors can buy digital gold online India and also sell the same. These are great for the retail investors, as it provides convenience, affordability, liquidity, security, and transparency.
The primary attraction of Digital Gold Savings Plans is that it can offer all the advantages of investment in gold with stable returns and low risk without the extra cost of tangible gold, making charges, and storage fees. Ease of investment along with liquidity through a developing secondary market makes digital gold very attractive. Further, investors are paid with the benefit of transparency and security of online transactions hence eliminating concerns like purity fraud.
The risks are the risks of platforms, market fluctuations, and the risk of change in regulatory factors. Digital gold, like the real thing, will be at the mercy of changing market conditions, even though risks for frauds are lower, as they can exist. For example, choosing a well-established platform, a long-term plan, will mitigate these risks.
The ideal beneficiaries for digital gold saving plans would thus be small investors, newcomers into the gold market, or perhaps people seeking investments with low-barrier-to-entry. This can allow people to invest smaller sums of money rather than buying gold in physical format, where people often have to buy in greater units. The plan is, therefore, inappropriate for people that have physical needs for gold reasons that are more culturally or emotionally based.
The Digital Gold Savings Plan, henceforth stands out to be an absolute safe liquid way to invest with making the exposure to gold without going all through all that complexity attached with the physical possession. Rightfully thinking of all risks would consequently prove of very much importance, thereby being such an invaluable inclusion in the portfolio of investment.
Related Articles
- Unique Aspects Of Gold Loans, That Everyone Must Know in 2025
- A Detailed Guide To The PM Mudra Yojna
