Digital gold is the buzzword right now. Throughout the day at some point or the other most of us find ourselves glued to the computer screen tracking gold price in Jamnagar or Himachal waiting for the right moment to buy some digital gold. However, the experience of buying digital gold is relatively new for India compared to physical gold. Hence it is necessary that you know of some essential factors about digital gold so you may avoid potential losses and maybe increase the profits:
Table of Contents
1. Know What You Are Buying
Digital gold is not a physical commodity like physical gold which you can hold and use for buying things. It is a dematerialized form of gold where you own units of ‘gold’ based on which you can buy or sell physical gold or redeem it for cash at any time. So ensure that before investing, you know what the product offers – for instance, whether your purchase is backed by real physical gold, what happens to the units if the vendor goes out of business and so on.
2. Check if you can cash out at any time:
Many platforms offer investment in digital gold but you cannot withdraw it immediately as it takes time for physical delivery of gold coins or bars. So make sure that your platform allows you to cash out your holding whenever required by the platform of your choice. Some platforms have a lock-in period while others allow instant withdrawal of funds on request through NEFT/RTGS after the due verification process is completed successfully by them. This is one of the most underestimated and overlooked factors when it comes to gold. However, imagine if you found today’s gold rate in nagercoil or any other city to be just at the right spot and you rush to cash out but your broker tells you there is a wait time. This could be demotivating and could also lead to losses. So be sure to be prudent.
3. The risk factor involved
Since we are talking about investments here, it is very important to understand that every investment comes with its own set of risks and benefits. Digital gold too has its benefits and risks which an investor should know before investing in it. The risk involved here is the same as what we face when we invest in the physical form of gold i.e., market fluctuations. Since the value of gold changes daily, so does that of digital gold, therefore one should not expect returns on their investments immediately.
4. Understand the hidden charges
Many platforms offer great returns on investments but they charge high management fees and other hidden costs which may reduce your overall gain. So make sure that you check all costs involved concerning different vendors before investing in digital gold to maximize your benefit from this lucrative asset class.
Usually, a platform will charge a fixed fee per gram of gold purchased. Apart from that, some platforms may also charge a holding fee after a certain point in time in case the investment remains unredeemed. So, make it a point to verify all the fees charged by the platform and also other charges such as courier charges, withdrawal charges etc.
5. Keep track of your investment
After investing, most people forget about it or they lose track of their investments and they don’t even remember how much money they had invested initially. It is important to keep track of your investments so that you don’t overshoot your budget or end up overspending on something you can’t afford.
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