Gold has always been a favorite investment instrument for Indian investors, and for good reason. Historically, gold has proven to be an able ally against inflation as well as equity market downturns. Recently, it has been one of the best performing asset class returning better than either equity or debt investments. No wonder investors’ attention is turning more and more towards the glittering metal for providing them with stable, shining returns.
Investing via ETFs is among the best ways to invest in Gold for various reasons. In this brief article, we’ll see what is gold ETF, the benefits of investing through it and how to go about it.
What is Gold ETF?
Exchange Traded Funds (“ETFs”) are open-ended funds that trade on a stock exchange just like the shares of an individual company. Unlike the share of a company, each unit of an ETF represents a portfolio of stocks. So it is similar to a unit of an open-ended mutual fund but with a big difference. The difference between an ETF and an open-ended mutual fund is that the units of an ETF trade on an exchange. So the investor can trade in the ETF during market hours and the units can be sold short or margined just like shares.
Gold ETFs are exchange traded funds that are meant to track closely the price of physical gold. So gold ETF lets you own gold in your dmat account. Each unit of the ETF lets the investor own 1gm of gold without physically owning it. Thus investing in a gold ETF provides the benefit of liquidity and marketability which are a limitation of owning physical gold. Gold ETF is liquid because you can trade in it at any time during market hours. Gold ETF is marketable because you can trade any amount in it just like a normal stock including short selling and buying on margin. Owning gold ETF also is cheaper than owning physical gold because it has no cost of carry (the cost of storing physical gold).
How to invest in Gold ETF?
Gold ETFs can be bought and sold in a stock exchange (such as NSE or BSE) just like regular stocks. One would need a demat account and a trading account through a stock broker to be able to invest in Gold ETFs
Which is the best Gold ETF in India?
There are quite a few good Gold ETFs in India. The full list of Gold ETFs can be seen here:
Among these, Quantum Gold ETFs offer option to buy in units of half-grams each. Others are available in units of one gram of gold each.
How Gold ETF works?
Gold ETFs are exchange traded funds that passively track the performance of Gold Bullion. These funds buy gold with investor’s money (on the behalf of investors) and convert it into units.
How to invest in Gold ETF online?
An investor can invest in Gold ETF very easily online by having an online trading account with any broker. At FundsIndia, we enable investors to invest in Gold ETFs either in lump-sum or using SIP very easily for all our account holders.
How to trade in Gold ETF?
Trading in Gold ETF is very easy – it is as simple as trading in a stock. One can buy at any time, and sell at any time using access to an online trading account.