Gold ETFs are passive investment instruments to track the price of domestic physical gold. It is a good option if you wish to diversify your portfolio. This helps offer better returns and reduce your risks in the long run. They are listed and traded on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and are often termed as open-ended mutual fund schemes. These can be bought and sold at current market prices Pan-India. It represents the yellow metal in paper or dematerialised form. These tend to be more profitable than other gold-related instruments in case you wish to invest big sums.
Knowing all these, gold ETFs can now come across as an attractive proposition. But it is vital to have detailed knowledge before choosing the product. Read on for an informed choice.
Features of Gold ETF in India
This is a low-risk investment. It would suitable for you if you wish to gain exposure in the gold market. Below are other features of Gold ETF.
- The money invested will go towards standard gold bullion of 99.5% purity.
- You will receive cash equivalent when you redeem the Gold ETF.
- It can be purchased online and placed in your DEMAT account.
- Gold ETFs are based on the price of gold and they do not entertain SIPs. You can only invest in gold funds via SIPs.
- You can tweak your asset allocation strategy and ensure risk is reduced and gains are maintained. You can expect total transparency on GOLD ETF holding.
- Gold ETFs can act as a hedge against any kind of market volatility rather than just acting as a plain investment product.
- These are traded on stock exchange just like shares of any other company.
You can start investing by opening a DEMAT account. Provide all the necessary documents like PAN card, identity and address proof. Now you can pick a GOLD ETF and get yourself an account where the units will get credited. Investors will receive the cash equivalent when they wish to redeem. This is an extremely convenient way of gold investment.
Benefits of Gold ETF in India
There are plenty of reasons why gold ETFs are a lucrative option. Work with a top asset management company to reap the following benefits:
- It has a unique structure and creation mechanism. You do not have to spend money on storage or additional taxes since it is in an electronic form.
- The ‘buy and sell’ can be done at any time of the day from any part of India. You are less likely to be affected by the local gold prices due to taxes.
- Minimum concern of theft or fraud since there is no physical gold involved.
- It can act as a collateral/guarantor if you wish to take loans from banks.
- Can offer complete protection against inflation or currency fluctuation.
You can use a SIP calculator to determine the returns from your gold ETF when parking your funds. Work with a responsible and trusted fund manager while investing in this product.