It is not a secret that Indians invest heavily in the metal gold. They hoard it for a rainy day to exchange for cash in an emergency. As a result, purchasing and storing gold is common among individuals. However, this brings a fair share of problems, like safekeeping, theft concerns, etc. This situation is when a Gold Exchange-Traded Fund or Gold ETF may be a better alternative, especially if you want to use gold as an option for investment.
What is Gold ETF?
Gold ETFs are commodity-based Mutual Funds that invest in assets like physical gold. These ETFs perform like individual stocks of companies, and you can trade them the same way on stock exchanges. So, when you invest in a Gold ETF instead of the physical yellow metal and liquidate the unit, you get the cash equivalent of the unit instead of the actual physical gold.
Since you are investing in an ETF backed by physical gold, Gold ETFs are best used as a tool to take advantage of the price of gold rather than get access to physical gold assets.
Advantages
The essential benefits of investing in the best Gold ETF include the following:
Alternative to physical gold
Gold ETFs are excellent if you wish to invest in gold but not for wearing it. One unit of this ETF is equivalent to one gram of gold but lets you escape the disadvantages of investing in physical gold. Some of these include the following:
Gold ETFs are backed by 99.5% pure physical gold bars, preventing you from worrying about purity.There is no hassle of safekeeping and storage since it is a dematerialized form of metal.You do not have to spend on making charges, as with gold jewelry.Transparency
Gold prices are publicly available on stock exchanges. In addition, the Gold ETF price is listed on the websites of stock exchanges like the Bombay Stock Exchange and the National Stock Exchange. These make investing in Gold ETFs transparent and let investors track changes every hour.
Easy trading
Buying and selling Gold ETFs is like other Equity Funds. Hence, the process is convenient, especially when you trade through a stockbroker or ETF fund manager. These ETFs are also easy to liquidate, and you can easily trade them during working hours.
Lower risk
Typically, gold prices do not fluctuate by a considerable margin. This advantage prevents a major loss even when the return on Equity decreases significantly.
Tax benefits
When you invest in Gold ETF, you only need to pay capital gains tax on your earnings. Other than this, these ETFs do not attract any other taxes like VAT, sales tax, wealth tax, or security transaction tax.
No exit or entry loads
Gold ETFs do not attract exit or entry loads when you sell or buy these funds.
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