Gold ETFs are the beneficial option given to all the investors who are interested in keeping Gold as a part of their investment portfolio. It is the perfect option to invest in Gold online. These ETFs are the units representing physical gold, that may be recorded on both paper and dematerialized form. They are traded in a way that is similar to the stocks and shares of any company or organizations.
The Gold ETFs or Exchange-Traded Fund (ETF) has the option of trading only on stock exchanges. This is the reason that they save us from the anxiety of safeguarding physical gold. And the most highlighting thing about Gold ETF is that they are much less expensive when compared to buying and selling of jewelry, bars or gold coins. The price which had spent in buying it is actually very close to the factual price of gold. However, we get the ultimate benchmark to be the physical gold price.
There are three main criteria based on the costs associated with Gold ETF. Most of us are aware that there are no entry or exit charges in Gold ETF, but still, we should consider these three criteria. When you have decided to invest in Gold ETF, the foremost thing to be monitored is- the Expense Ratio. This ratio should be generally low when compared to other mutual funds, which are around 1 percent.
The second thing that we should look into is the Broker Cost. We should account for this aspect every time we purchase or sell the units. The last but not the least criteria are not the charge/cost but it sure knocks out the returns, which is nothing but the tracking error. This occurs due to the fund expenses and cash holdings.
Hence, if you want to bank on gold, investing through the ETF is the best choice. According to the recent values, 10 gram of gold is being traded at Rs. 30,900 in the market, where we knew that the actual gold price ranges around Rs. 3,100. The rule is similar to the mutual funds, the value of the investment is the value of equity or debt, whereas here it is the Gold as the underlying asset.
There are plenty of Gold ETFs launched around the market today. A common asset called Physical Gold impacts every kind. Hence, the valuation and performances of each type are linked and depict striking similarity. So it is necessary to monitor the changes in the tracking error and the trading volumes.
It is better that you opt for the funds with least tracking error to possess higher trading volumes. There is no limit on funds and the process of buying and selling can happen between the trading hours- 9:15 hrs to 15:30 hrs. Therefore, it is a must that you avoid partial exits and sustain your gold investments for the long term.
You should check the Total Expense Ratios (TER) and the Till Date Percentage (YTD) before you try to opt for one. It is also recommended that you monitor the NAV (Net Value Assets) of each of the Gold ETFs. Based on these values, one may come to the conclusion on what to buy and how much to buy.
Here are the top 10 Gold ETFs that you will find in the market at present:
1. Invesco India Gold ETF
TER %= 1 YTD %= 10.74 NAV (in Rs)= 2869
2. Canara Robeco Gold ETF
TER= 0.78 YTD= 9.74 NAV= 2930
3. ICICI Prudential Gold ETF
TER= 0.89 YTD= 8.36 NAV= 285
4. IDBI Gold ETF
TER=0.58 YTD= 7.96 NAV= 2915
5. UTI Gold Exchange Traded Scheme
TER= 1.07 YTD= 7.51 NAV= 2806
6. Kotak Gold Exchange Traded Scheme
TER= 1 YTD= 6.72 NAV= 274.75
7. SBI ETF Gold
TER= 1.07 YTD= 6.34 NAV= 2834
8. HDFC Gold Exchange Traded Fund
TER= 1.09 YTD= 6.28 NAV= 2857.50
9. Quantum Gold Exchange Traded Scheme
TER= 1.03 YTD= 6 NAV= 1389.90
10. Reliance ETF Gold BeES
TER= 1 YTD=5.84 NAV= 2783.30
As an initial step, you should open a Demat Account with a stockbroker, for online trading. Once you get the user ID and password to log on to the broker's official website of trading platform, choose the suitable Gold ETF. You can now place a buy order for purchasing a particular Gold ETF unit. The money for the particular transaction will be debited from your account. Henceforth, units are credited to your Demat account, once you start the trading from the very first day.
It is also good to be informed that Gold ETFs are taxed and considered as non-equity investments. The profit attained from the short-term capitals less than a period of 36 months, will be entertained under contemporary tax slab rates. When this type of income is present in the account of the investors, they must pay the tax demanded as per the guidelines of the government tax rules. At the same time, the profit acquired from the long-term capitals, which is gained over a period of more than 36 months, is also subjected to tax redemption. But the criteria fall at the tax rate of 20% after the submission of the indexation.
Investing in gold is preferred by many people all over the world. People belonging to the previous generation are known to have invested in physical gold, but these days, we have numerous other options for the same. One of the best options would certainly be the investment in Gold ETF.
In any way, you need to decide whether investing in other mutual funds or in physical gold such as bars or coins is your preference or you want to go for Gold ETFs. The main advantage of Gold ETFs is that, neither do you have to stress over safeguarding your locker, nor do you have to attain low margin. In the end, it is safe and profitable too. Hence, it is truly one of the smartest ways of investment.