A Gold ETF is an exchange-traded fund (ETF) and a commodity-based Mutual fund that aims to pursue the physical gold price in the local market and invests in gold bullion. They have combined features of stock investment and gold investments.
They are considered to be passive investments that are based on gold prices and investments made in gold bullion. Gold ETF transactions are done through stock brokers, who will utilize the funds you give them to invest, to buy gold at market rates.
One unit of gold ETF is considerably equal to one gram of gold at the cost that you purchased it. These units are bought and sold on the shares that are exchanged for cash at the point of sale, just like a company stock.
Gold ETF Schemes in India
In India, Gold ETFs are considered to be a good investment in the long term. Gold is a barrier against inflation and can help to protect your portfolio from an unpredictable market. Though Gold ETFs are not tax-free in India, they do possess certain tax benefits. Long-term capital gains on gold ETFs are taxed at 20%, which is lower than the other investments
The main factors to consider in Gold ETF schemes are:
Assets under Management (AUM) – It is the market value of all the financial assets that a company manages for its investors. If a company has a high AUM value, it reflects on the high number of clients and portfolios that it handles.
Net Asset Value (NAV) – It is the value of the company’s assets except the value of its liabilities. NAV is also the ETF’s per-share value.
Returns – The profits or income made by an ETF scheme are known as returns.
Thus, looking at the profiles of various ETF schemes based on AUM, NAV, and returns, you can easily decide whether it is most profitable to invest in or not. Here, short-term returns are higher than long-term returns.
7 Best Gold ETFs in India
Before selecting the best gold ETF in India, make sure to look over the track record, low expense ratio, liquidity, and alignment with your risk appetite to make a wealthy investment. The gold ETF that gives a sound return in India may differ depending on the time period. Following are the top-performing gold ETFs in India in recent years
Nippon India ETF Gold BeES
Nippon India ETF Gold BeES is an ETF offered by Nippon Life Asset Management to provide returns that closely correspond to the price provided by the local market. It influences investors to invest in gold and provides flexibility and liquidity as it trades on stock exchanges like regular stocks.
ICICI Prudential Gold ETF
ICICI Prudential Gold ETF is the popular gold ETF scheme that is the best for those who are seeking long term investment. ICICI Prudential Gold ETF seeks to offer investment returns that, before expenses, closely track the performance of domestic prices within the domestic market, specifically referencing the Gold derived from the LBMA (London Bullion Market Association) AM fixing prices.
HDFC Gold Exchange Traded Fund
The HDFC Gold ETF is an exchange-traded fund that aims to follow the substantiated performance of gold which is managed by HDFC Asset Management Company Limited. It facilitates investors with a convenient and cost-effective way to invest in gold digitally.
It works by eliminating the need for physical storage and ensuring the quality of the underlying gold. This scheme is appropriate for those who want long-term capital gains and who invest mainly in fine gold bullion.
Kotak Gold ETF
Kotak Gold ETF is an open-ended gold exchange traded fund that aims to invest in gold by going through its current market price. It can be considered as an efficient investment since it holds the advantage of liquidity and transparency. Each Kotak Gold ETF unit is equivalent to one gram of gold.
SBI-ETF Gold
SBI ETF Gold is one of the best gold ETFs offered by the State Bank of India. Being an open-ended gold commodity scheme, the ETF allows investors to invest in gold, following the price of gold in the domestic market. This scheme is convenient and cost-effective for those who need long term capital gain, gold-based securities, and gold bullion.
UTI Gold Exchange Traded Fund
UTI Gold ETF is an open-ended scheme tracking the domestic price of Gold. The scheme allows the investment in physical gold bullions of 99.5% purity, LBMA certified 1 kg gold bars. There is no assurance or guarantee that the investment objective of the UTI Gold ETF will be achieved. It considers the scheme costs, the price and yield of gold, and invests primarily in gold and gold-related assets.
Axis Gold ETF
Axis Gold ETF is an exchange traded fund and an ideal option for investors. It allows investors to invest in gold by tracking the local price of gold in the market. It is much better in the case of long-term investments.
Check out our article comparing the Gold ETFs and Gold Mutual Fund.
Conclusion
Thus, gold ETF is a low-risk investment that suits every investor, especially, conservative investors. The key advantage of golf exchange traded funds is their pricing transparency. It is readily tradable in the stock market. It is a good option instead of real gold.
FAQs
-
Who Should Invest in Gold ETF?
Gold ETFs are a perfect option for investors who wish to track and reflect the actual price of gold at present. It is ideal for those who do not want to have the actual commodity but want to boost their income by trading. It allows them to gain market exposure on the price as well as the performance of actual gold.
-
What are the Major Advantages of Gold ETF?
The major advantage of Gold ETFs is it is easier to trade, they are much easier to liquidate, there are no entry or exit loads, tax benefits, and less market risk. It is more convenient than traditional hypothecation as it is significantly less time-consuming.
-
What are the Disadvantages of Investing in Gold ETFs?
Physical gold provides a higher level of security than Gold ETFs, as it eliminates counterparty risk. It may not perform as well as physical gold does during times of economic uncertainty or geopolitical instability.