Gold Exchange-Traded Funds (ETFs) – Who are You?
It is strongly believed that Indians have a strong affinity towards gold for centuries now. Not to miss, the country’s first–ever Gold ETF was started in the year 2007, which thereby set the trend. Precisely, it’s an underlying asset is GOLD. Therefore, gold ETFs give you enough exposure to the Indian gold market. Let’s figure out more about this here:
What are Gold Exchange Traded Funds?
Gold Exchange Traded Funds or ETFs combine the feature of gold investments and stock trade. Also, they are based on the price of gold & investments are made in ‘gold bullion’. The transactions of gold ETF are made through stock-brokers who eventually will use your money to invest. They buy gold at market rates. One gold ETF unit is equal to 1-gram gold at the purchased price. At the most, these units are bought & sold on the cash market of the stock exchange just like company stock. There is no such difference.
How to Invest?
Two main things are required. Here:
- Choose a fund manager/gold ETF product: Gold ETF products are offered by several private financial institutions and banks. Once the product is chosen, your fund manager will act as stock broker on the National Stock Exchange (NSE), and, buy & sell gold. The process is like trading in shares and stocks.
- Demat Account: Since, gold ETF is a security that is bought & sold in dematerialized, electronic form, and not in physical form, it’s important to have a demat account so that trading can be done. You can either open a demat account through your stock broker or the fund manager you have selected.
Features of Gold ETFs
- Low-risk: Fluctuations in the gold price are not as high as compared in equities. This simply means, if your returns on equities go down, gold ETF could act as your savior, thus, preventing you from incurring huge losses.
- Transparency: Just like stocks & shares, gold prices on the stock exchange are also available publicly. Thus, you can know the value of your portfolio by checking the gold prices for the day/hour.
- Cost-effective: If you are investing in gold ETF, there is NO entry or exit load (a charge that is to be paid for buying or selling of units). Also, the brokerage charges are low.
- Easy to Trade: The minimum lot or bundle you need to purchase for trading is 1 unit in ETFs (1 gram of gold). You can buy or sell units through your ETF fund manager or stock broker on a daily/hourly basis.
- Tax Benefits: Whilst gold ETFs attract LTCG after one year, you don’t have to pay Wealth Tax, VAT or Securities Transaction Tax.
A Good Investment?
The key factors are right here:
- Investing in gold ETFs is far more convenient than investing in physical gold. However, you don’t have to worry about additional payments (such as locker charges or making charges) or secure storage.
- Gold is a hedge against currency fluctuations and inflation and is considered as a safe and secure investment.
- You can buy or sell gold ETFs through your broker at any price.
- You can also use gold ETFs as collateral security for loans.
- You can diversify your portfolio and make it stronger with gold ETFs.
As compared to buying physical gold, gold ETFs are safe and secure with regard to maintenance and storage. Make sure, to calculate your risk-appetite before finalizing. Furthermore, you can talk to the experts.
“Are you looking to invest? How about opening your account with Gulaq & start investing in Direct Mutual Funds? Get in touch.”
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.