Gold ETF 101 - Your Guide to Investing in Gold ETF

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Today, on the Financial Desk, we have

• What is Gold ETF?
• Benefits of Investing in Gold ETF
• How To Find the Gold ETF that Works for You??
• Who Should Invest in Gold ETF?
• Gold ETFs to Consider in India
• Conclusion

What is Gold ETF?

Gold has always been considered a stable and safe investment option. It is the primary choice for those looking for a stable portfolio and diversification. While many other investment choices are susceptible to market volatility and unexpected economic crises, investing in gold cushions against market volatility. A gold ETF, or Gold Exchange-Traded Fund, is a commodity-based mutual fund that invests in gold. These exchange-traded funds act similarly to individual stocks and are traded similarly on the stock exchange.?

By investing in a gold ETF, investors can avoid the hassles of storing physical gold. It’s convenient and combines the security of gold with trading flexibility. When you buy gold ETF, you are not precisely purchasing physical gold. Instead, it is a representation of a certain amount of gold. It is gold in both dematerialised and paper form. An investor chooses to invest in stock options rather than physical metal, and upon trading, they receive the cash equivalent of the unit's value instead of tangible gold.

Benefits of investing in Gold ETF

• Smart Storage - When you invest in gold ETF, your asset is stored in your demat account. This means you don’t need to worry about storing physical gold or concerns about theft.
• Liquidity - Gold ETFs are as liquid as stocks. You can purchase and sell them anytime, anywhere.?
• Market cushion - Gold ETFs act as a hedge against sudden market volatility. It cushions your investment against drastic fluctuations and stabilizes the portfolio.?
• Avail loan - Investors can avail themselves of loans from financial institutions by pledging their gold ETF as security.?
• No entry and exit loads - In India, gold ETFs do not attract entry or exit loads. Investors will not have to pay additional fees while purchasing or selling these funds.?
• Buy desired quantity - Gold ETFs are available as units. Investors can purchase the desired quantity at low costs.?
• Less market risk - Unlike stocks, gold prices are more stable and don’t experience significant fluctuations. This stability helps reduce the risk of major losses, even when equity returns decline sharply.

How to find the Gold ETF that works for you??

Before investing in gold ETFs, investors should consider several key factors that can affect the fund's overall performance and suitability.?

• Evaluate past performance - Before investing, evaluate the past data of the gold ETF. Analyse the insights, potential, and how the ETF performed during various market conditions and deduce the investment strategy accordingly.
• Liquidity - Check and ensure the liquidity of the gold ETF, as that determines how quickly you can buy and sell its units.?
• Tracking is everything - Investing in a gold ETF is pointless if it doesn’t track the gold price accurately and precisely. This ensures that the gap between the returns of the Gold ETF and its underlying index remains minimal, allowing you to receive returns that closely mirror the actual price movements of gold.
• Look for a lower expense ratio - While investing, look for a gold ETF with a lower expense ratio. It will lower the cost of managing an ETF, which, on the other hand, will increase overall returns.

Who should invest in Gold ETF?

• Those who are looking to diversify their portfolio
• Those who want to invest in gold but do not wish to store physical gold
• Professionals who do not have the time to monitor assets and prefer a stable and simple investment portfolio
• Retirement planners who want to build a retirement portfolio with safe and stable investment options

Gold ETFs to consider in India

With Diwali around the corner, here are a few gold ETFs to consider investing in

• IDBI Gold Exchange Traded Fund

Offered by: IDBI Mutual Fund

Market capitalisation: Rs. 95.12 cr.

Expense ratio: 0.10%.

• Axis Gold ETF

Managed by Axis Mutual Fund

Market capitalisation: Rs. 319.17 cr.?

Expense ratio: 0.53%.

• ICICI Prudential Gold ETF

Managed by ICICI Prudential Mutual Fund

Market capitalisation: Rs. 1,905.05 cr.?

Expense ratio: 0.50%.

• HDFC Gold Exchange Traded Fund

Managed by HDFC Mutual Fund

Market capitalisation: Rs. 1,906.09 cr.

Expense ratio:? 0.59%.

• Nippon India ETF Gold BeES

Managed by Nippon India Mutual Fund

Market capitalisation: Rs. 5,168.88 cr.

Expense ratio:? 0.79%.

Source: Tickertape

(Alice Blue does not endorse any of the stocks/companies mentioned above. The information provided is for educational purposes only)

Conclusion

Gold ETF is a stable and convenient investment choice that allows you to diversify your investment portfolio. Research India’s leading gold ETFs properly and design your investment strategy accordingly.?

Thank you for reading. If you would like to know more about gold ETF, please drop a comment or DM us now.