As the digital revolution reshapes the investment landscape, senior citizens are exploring new avenues to grow and protect their wealth. One such option that has gained popularity in recent years is digital gold. But is it a suitable investment for retirees? Let’s first understand what digital gold is.

Digital gold, as the name suggests, refers to a digital representation of physical gold that investors can buy, own, and trade electronically. Instead of holding physical gold bars or coins, investors can purchase fractional units of gold through online platforms or mobile apps.

How Does Digital Gold Work?

Digital gold platforms enable users to purchase a fraction of physical gold, typically stored in secure vaults by trusted custodians. Each unit of digital gold is backed by an equivalent amount of physical gold, ensuring transparency and security for investors.

ALSO READ: Retirement Planning: 7 Strategies To Leverage Annual Bonuses For Financial Security

Pros of investing in digital gold for senior citizens:

Convenience and accessibility: Digital gold platforms offer seniors the convenience of investing in gold without needing physical storage. With just a few clicks, retirees can buy and sell gold anytime, anywhere, making it a hassle-free investment option.

Affordability: Investing in digital gold would allow seniors to start with small amounts, making it accessible even for those on a fixed income. Fractional ownership options make investing easier for retirees according to their budget and financial goals.

Liquidity: Digital gold investments are highly liquid, allowing seniors to convert their gold holdings into cash quickly and easily when needed. This liquidity can be especially beneficial for retirees who need funds for emergencies or unexpected expenses.

Portfolio diversification: Gold has long been considered a safe-haven asset and a hedge against inflation. By adding digital gold to their investment portfolio, seniors can diversify their holdings and reduce overall investment risk.

ALSO READ: 8 Sovereign Gold Bond (SGB) Tranches Due For Premature Redemption In May 2024, Know Details

Cons of Investing in digital gold for senior citizens:

Volatility: Like any other investment, the price of gold can be volatile, and digital gold is no exception. Seniors need to be prepared for market fluctuations and understand that the value of their investment may go up or down over time.

Storage and Security Concerns: While digital gold eliminates the need for physical storage, it has its own set of security concerns. Seniors must choose a reputable and secure platform to invest in digital gold to minimize the risk of fraud or cyber theft. Moreover, most apps do not charge locker fees, so checking for any associated charges is advisable, as they are deducted from the principal amount.

Transaction Costs: Some digital gold platforms may charge transaction fees or other associated costs, which can eat into seniors’ investment returns. The minimum investment varies across platforms. Some applications allow investment with just Rs 1, while others may have a minimum limit of Rs 100 or more. Therefore, it’s essential for retirees to carefully consider these fees before investing in digital gold.

Lack of tangibility: Unlike physical gold, which retirees can see and touch, digital gold exists only in electronic form. Some seniors would prefer the tangibility of physical gold and may feel uncomfortable investing in a digital asset.

Capital Gains Tax: Since government bodies like RBI or Sebi have no authority to regulate this investment type, if you are planning to buy digital gold, seniors should remember that it attracts tax as per the income tax rules for gold purchases. The tax on digital gold will attract 20.8 per cent, the same as physical gold and paper gold.

ALSO READ: What Is Kanuka Pension Scheme And Why Is It Making Headlines?

Holding Period Constraints: The maximum holding period for digital gold across apps and platforms is five years. After that, the investor must sell or convert it into physical gold.

Convertibility To Physical Gold: Not all platforms offer the option to convert digital gold into physical gold. If you prefer this option, select a platform that provides conversion services.

GST: Digital gold purchases are subject to a 3 per cent GST (goods and services tax), deducted from the principal amount. It’s essential to consider GST implications when investing in or selling digital gold.

So, should senior citizens invest in digital gold? The answer depends on their individual financial goals, risk tolerance, and investment preferences. While digital gold offers convenience, accessibility, and portfolio diversification, seniors must also consider the potential volatility, security concerns, associated costs, and lack of regulatory norms.