Gold ETF : A smarter option over any other form of Gold

In this new normal the popularity of Gold ETFs (Exchange Traded Fund) amongst investors has surged high. Gold performed well in 2020 with gains of nearly 28% in rupee terms. This made many individuals realise that a sensible portion of their investment has to be in this yellow metal.

As gold can always be considered as a healthy investment instrument that can be used for hedging. Therefore, one must invest 5%-10% of their portfolio in gold without worrying much about the short-term fluctuation.

Following the tradition gold is still bought or exchanged in a physical form but there are certain problems in handling physical gold such as storage, chances of theft, purity concerns, etc. Considering these issue associated with physical gold, one could invest in Gold ETFs or Gold funds.

Lets Know what is Gold ETF

Gold ETF, or Exchange Traded Fund, is a commodity-based Mutual Fund that invests in assets like gold. Being an exchange-traded fund it can be bought and sold only on stock exchanges. An investor invests in stocks instead of the actual metal, and once it is traded, they are credited with the unit’s equivalent in cash instead of actual gold.

1 Gold ETF unit is equal to 1 gram gold. Investing in Gold EFT can help you to track gold prices and eliminate the need of storage. The transparency in pricing is another advantage. Investors can also save money spent on storage and additional taxes in case of physical gold.

Benefits of Gold ETF:

Flexibility: Gold ETFs are flexible, can be purchased online and placed in your Demat account. The asset management company (AMC) is responsible for trading them on a stock exchange where, you can enter/exit whenever required. Even in the Demat format, gold ETFs behave the same as physical gold.

Liquidity: Gold ETFs offer high liquidity as they can be traded in the stock exchange during a trading session at the prevailing price.

No Investment Limit: Investors has the advantage to decide the quantity. One can buy/sell as little as 1 gram of gold which is equivalent to one unit of ETF.

Pricing: Expense ratio on Gold ETF is a maximum of 1%. However, there are additional transaction costs linked to the buying or selling of the ETF.

Tax Treatment: Taxing on Gold ETF is as per the holding period of the investment. In case you sell them before 36 months, the taxing is done according to the income tax slabs. If the holding period is more than 36 months, a 20.8 tax is charged including CESS.

Best Gold ETF/Funds to Invest in 2021:          

*Data as on 5^th January 2021

So, choose gold as something to invest for long-term and diversify your portfolio with exposure to the gold market as it is a low-risk investment.

To know more 

You can use GIIS Financial tools or Our Android App  for Investment, tracking and Asset allocation planning. 

*Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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