I stayed away from gold all my life. I was different from others who loved flashing gold and diamond jewellery on important occasions. I never could get myself to buy more gold. What I bought at the time of my marriage seemed enough. And anyway, most of it went into the locker. When gold prices began to move up a few years ago, I realised my negative approach to gold was hurting my wealth. I needed gold to protect myself from the crashing equity market prices. I began to hunt for choices.

There are several products that can be used if you want to be purely an investor in gold, without having to buy, wear or store gold. Gold exchange traded funds or ETFs, gold funds, and e-gold are options for those looking at gold as investment. If you are interested primarily in gaining from increase in gold prices over time, these might be the right choice for you. These options are far superior to buying jewellery. They are efficient, low cost (no making charges and wastage) and easy to implement. Your financial advisor or bank can help you with the actual purchase.

Gold ETFs can be bought from the stock market into your demat account. A Gold Fund of Funds (FoFs) can invest in gold ETFs for you, but will charge a higher fee than a pure gold ETF. However, you won’t need a demat account, and it offers other benefits such as systematic investment options and easy redemptions. E-gold units can be bought and sold through the stock exchange. The transactions are relatively easier than ETFs. E-gold attracts wealth tax and offers long-term capital gains benefits only if held for more than three years, unlike gold ETFs and FoFs where these benefits are available if held for more than one year.

If your interest is in buying gold jewellery for personal use, or as coins for the near future, then the gold savings schemes offered by jewellers may help. You accumulate your savings over a period to buy jewellery.

These schemes are available in two forms. In the most common form, you pay a fixed monthly instalment over a fixed period to the jeweller. The last month’s instalment is added by the jeweller. This is actually the interest that the jeweller pays for using your money. The accumulated amount is used to buy jewellery at the prevailing market rate on maturity. You bear the making charges or cost of wastage as charged by the jeweller. This scheme is no different from a recurring deposit for buying gold. The jeweller uses the advance paid by you for his business, and you buy gold at the price on maturity, which can be higher or lower from the time you began to save.

In the other kind of gold-saving scheme, you pay a fixed monthly instalment, but the jeweller credits gold to your account at the rate on the date of the instalment. Here, you accumulate gold every month. There is no funding of the jeweller, so there is no free instalment either.

Buy gold or not is a matter of personal choice. But if investment is your aim, don’t buy gem-studded pieces with high making charges, low resale, and low gold component, and imagine that you are investing. Instead, choose efficiently.

Taruna Changulani, a chartered accountant, is Director and Co-founder of the Centre for Investment Education and Learning, Mumbai.