Gold Exchange Traded Fund is a financial product that represents ownership of underlying gold assets. It is listed on a stock exchanges and offers a simple, cost-efficient and secure way to invest in the gold.
Prices of Gold ETF quoted on stock exchanges moves in tandem with spot gold prices to ensure the equivalent return however with much ease and without deduction of any making charges. As such, it is suitable for all such people who want to buy gold for future needs or invest for better returns.
Several fund houses have launched Gold ETF schemes which lists on stock exchanges i.e. NSE, BSE and MCX-SX. All you need to have is an account with your stock broker and Demat account. You may buy or sell Gold ETF, similar to any other stock, with ample liquidity available in various schemes.
Is it better to invest in gold ETF rather than buying a physical gold ?
It all depends on the purpose for which you want to buy gold. If you want jewellery for the marriage or function, then you should visit jeweller only. However, if your purpose is purely investment or buy for any of your future needs like marriage of daughter after 5-10 years, then buying Gold ETF is better. It not only reduces the charges on making jewellery but also the removes the risks and liabilities of keeping gold physically. Also, they are tax friendly and very convenient to buy and sell. let us look at the advantages of Gold ETF as below:
- Diversification : Considered as an excellent diversification for your portfolio.
- Liquidity : It may be traded on the stock exchange thus making the process fast and convenient and highly liquid.
- Safety : The fund managing the Gold ETF buy it from reliable sources and and keep it safe thus ensuring safety and quality.
- Security : Buying and selling in electronic mode removes the risks of unwarranted situations.
- Lower Cost : Electronic trading is by far cheaper as compared to physical trading thus making it a cost effective way of buying gold.
- Making Charges : It is bought and stored as bars by the fund house and investors only buys the units as such no making charges involved.
Costs associated with Gold ETF
All fund houses charges a management fees which is normally 1% of the AUM as such equivalent amount gets deducted every year from your gold value. Also you need to pay brokerage and other transaction charges and taxes on your buying and selling of Gold ETF on exchanges.