Digital gold is being viewed as a new investment option. However the digital gold is also offering a good return to their investors but there are a few misconceptions among investors between the real gold and the digital gold. Companies are charging higher maintenance base and additional GST from customers to maintain the digital gold where the actual benefit is not received by the investor. If you are also investing in digital gold to multiple apps including phonepe, Paytm, and other mobile applications then you can read this article which will help you to make a detailed insight about the investment in digital gold where you can understand the merit and demerits and the limitation of this type of investment plan.
SEBI Warning! Is Digital Gold Really Safe?
However the digital gold is provided by companies according to the investment and investors can sell it at any time according to their convenience. But there is a regulatory issue in this investment. Securities and Exchange Board of India- SEBI is maintaining and governing all the investment and Exchange Services in India including ETF, mutual funds, stock market etc. But digital funds are not regulated by SEBI. However, companies including phonepe, Paytm and other mobile apps have good networking but there is no countability or monitoring of digital gold by government agencies. So, you will not be able to monitor if the gold has been purchased or not from your money. Apart from this if the company declares the Bank corrupt then you will not have any option to claim your funds and digital gold.
Difference Between Digital Gold and ETF
Most of the investors are considering gold ETF and Digital gold as the same investment plan but, gold exchange trade fund- ETF is monitored by SEBI. It is also a digital version of gold but in this category, the investor is required to have a proper Demat account and will make all the transactions on stock exchange platforms. So if you are investing in a gold ETF then SEBI will protect your rights in the stock market similar to other investment programs including Mutual Fund.
Differentiate Between Gold ETF and Digital gold
All the stock investments require a proper Demat account where you will be required to enter your bank account and PAN Card details. The trade of Gold ETF is also done using Demat account. But if you see an online portal which is offering a service to purchase gold without having any Demat account then it is a digital gold. Investors and stock holders make deals on stock exchanges under the Governance of SEBI to protect consumer rights. But in the trading of digital gold, the individual gold seller company contacts an online financial company and offers the service to purchase gold digitally without SEBI regulations.
The second indicator is to check the NAV of the gold. It is only provided to those stocks who are purchased from the stock market. Since we have already discussed that Demat account is required to purchase gold ETF, but if you are able to purchase Gold stock through upi without any other account then it is a digital gold.
Hidden Cost Which Will Affect Your Overall Profit
You purchase digital gold then you will need to pay 3% GST at the time of purchasing the gold to the government. Similarly if you resale your stock to another individual then you will also be required to pay in GST again which will not help you to gain actual profit in this business.
Companies which are providing digital gold services are earning double benefits from customers and the gold company has to charge platform fees from the customer and their also charge storage cost from the customer. Companies are asking to pay additional monthly or annual charges to maintain your locker for the digital gold which will be required to pay an additional amount and will not help you to earn good benefits.
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Alternates of Digital Gold
If you are willing to invest in gold then you can explore other types of investment in gold which are completely digitally and governed by SEBI, so it will also protect your consumer rights.
- Gold ETF: Gold exchange traded fund- ETFs are also providing opportunity to purchase gold digitally which is similar to purchasing stock from any company on a stock exchange platform.
- Gold mutual funds: Gold Mutual Funds are also beneficial for investors where you can purchase the gold mutually without having any Demat account and can pay the entire amount in small SIPs so it will help you to collect a good gold at the end of completing the maturity.
- Sovereign gold bonds- SGBs: These bones are issued by RBI where investors get an annual interest of 2.5% on all the bonds purchased from the government.
These are the alternative which can be used while purchasing gold digitally as it is governed by government agencies and have proper accountability which will protect your rights and will provide you a good return.
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